These are stories that have elements which are implausible (e.g. talking animals), fantastical or simply describe feasible or possible, plausible events that have not actually happened to characters that don't actually exist. All fictional stories have elements of drama whether physical challenges, mental or both.
There are various types of fictional categories often based on other various aspects of culture, technology or nature.
Many fictional stories may borrow elements and themes from various genres to create a very diverse range of stories. For example a story like Twilight combines elements of supernatural, action adventure with romance and historical fantasy. But it usually focuses mainly on one theme, in the case of Twilight it is contemporary fantasy fiction.
Figuring out whether a story is more one theme or genre or another can be arbitrary and depends on an individuals personality, cultural background, how they wish to view the story. In some instances it could be the way a story is marketed too. It is also about making a personal judgements on percentages of particular themes within a story a person is willing to tolerate for enjoyable entertainment.