Short answers, pulled from the story.
A fairy tale is a short story that belongs to the folklore genre. Such stories typically feature magic, enchantments, mythical or fanciful beings like dragons, dwarfs, elves, fairies, giants, gnomes, goblins, griffins, merfolk, monsters, monarchy, pixies, talking animals, trolls, unicorns, witches, wizards, woodwoses, and other magical species.
The term itself comes from the translation of Madame D'Aulnoy's Conte de fées first used in her collection in 1697. This marked the beginning of the specific terminology for these stories within French literary circles during the late 17th century.
Folklorists classify fairy tales using systems such as the Aarne-Thompson-Uther Index and Vladimir Propp's morphological analysis. The Aarne-Thompson-Uther Index groups tales by overall plot while Propp identified thirty-one functions and seven characters or spheres of action that compose a tale.
Originally adults were the audience of a fairy tale just as often as children. Literary fairy tales appeared in works intended for adults but in the 19th and 20th centuries the fairy tale became associated with children's literature through revisions by figures like the Brothers Grimm and Walt Disney.
Jungian Analyst Marie Louise Von Franz interprets fairy tales based on Carl Jung's view of them as spontaneous products of the soul representing archetypes from the collective unconscious. Psychoanalysts such as Bruno Bettelheim argued that the cruelty of older fairy tales symbolically resolves psychological conflicts for both children and adults.