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Fantasy

"Fantasy isn't just a jolly escape: It's an escape, but into something far more extreme than reality, or normality. It's where things are more beautiful and more wondrous and more terrifying. You move into a world of conflicting extremes."

—Terry Gilliam

Fantasy: it's stuff with magic in, not counting Psychic Powers, Magic From Technology, anything meant to frighten, classy literature, or anything strongly religious, unless the psychic powers coexist with other forms of magic, or are stretched to the point where they are some other form in all but name, or the technology behind the magic is Magitek or the story is dominated by fantasy tropes, or — and where did that clean-cut definition go?

In fact, while the core of the fantasy genre is clear enough, there is no succinct definition that encompasses it all. The boundary with Science Fiction is notoriously ambiguous, but the boundary with horror is often less fuzzy. Religiously inspired works, like the Left Behind series, can have a basic good versus evil plotline that would fit well in High Fantasy, but few would place them there, and so on.

Within fantasy, there are a few subgenres, in alphabetical order to avoid favoritism, but easily divisible into genre (labelled as Fantasy) and outside of genre.

Often placed outside the Fantasy genre:

Magical Realism, often not marketed as fantasy
Mundane Fantastic, also not often marketed as Fantasy, in which Fantasy (or in some cases Superhero or Science Fiction) elements mix with more naturalistic elements.

Almost always marketed as Fantasy:

Heroic Fantasy, Trope Codifier the Conan stories
High Fantasy, launched by The Lord Of The Rings
Historical Fantasy - takes places in a version the history of our world, but with some fantasy elements added.
Low Fantasy - anything not set in our world which isn't one of the three others.
Magical Land, virtually a sub-genre in itself, and common in works for children. This overlaps with Modern Fantasy.
Science Fantasy, which overlaps with other sub-genres
Urban Fantasy, confusingly has two meanings: a) a story which takes place in our world or a recognisable Alternate History version of it or else b) or a major city in a secondary world.

Common features of genre fantasy.

A secondary world. The setting can be a tricked-out version of our present day world, the remote past or future, or simply a-hisotorical. The inhabitants can be anything from human only, through the standard elves, dwarves and orcs, to a complete Fantasy Kitchen Sink. See Standard Fantasy Setting for the, er, standard fantasy setting.
Appeal to a pastoral ideal. Much genre fantasy, of all genres, appeals to the pastoral ideal, one reason for the pseudo-medieval settings. Even urban fantasies will quite often depict cities as blots on the landscape, whose denizens are blinded to what really matters by material ephemera. There are some fantasies, however, which deliberately take the opposite stance.
Magic And Powers, specifically Functional Magic, either respected, feared, persecuted, disbelieved, either common as in legend, through to rare but available to the well connected, up to a ubiquitous part of everyday life. Magitek usually lies at the extreme end of this scale. Often a closed circle of wizards, master and apprentice system, universities of magic, teaches and/or regulates it. However, even magic itself isn't a required element, as novels such as Ellen Kushner's Swordspoint or K.J. Parker's Devices & Desires, which feature no magic whatsoever but take place in an alternate, pseudo-historical world, are still classified as fantasy. This is due in part to their widespread use of other tropes associated with fantasy, particularly Low Fantasy.