With any genre, the question that comes to mind right away is one of borders. Where does one genre end, and another genre begin? No genre has as much controversy surrounding its borders as fantasy. There are numerous works that can be seen as fantasy, but could also be seen as Sci-fi or Horror, or even a detective story. However, in the case of fantasy, I think it is actually a needless argument.
The word fantasy has been corrupted through usage for thousands of years. If you look at the origins of the word Fantasy, it comes from the greek phantasia which means imaginary visions or perceptions. This is the basic definition I will be using for fantasy, as I find it eliminates many of the arguments about what is and isn't fantasy.
Science fiction is a genre that likes to be held separate from fantasy, especially by critics. It is often seen as being of greater value, despite the fact that it becomes dated so quickly. There are two things that make science fiction just another form of fantasy to me. Firstly, to quote Arthur C Clarke, “Any sufficiently advanced technology is indistinguishable from magic.” For example, does it matter if it's magical healing pixie dust, or advanced medical nanite dust? Not really. In science fiction, technology serves the same purposes in a plot that magic does in any kind of fantasy. Additionally, the science used in Sci-fi is not usually real, or even possible by the technology of the era in which it is written. At that point, the plot is relying on something imaginary to function.
That right there is what makes it possible to classify a broad range of works as fantasy. I believe that for any kind of fantasy, the main criteria is that it relies on something that does not, and more importantly, to the best of our knowledge could not exist in our world. Through this system, it is easy to classify other things as fantasy as well.
For example, horror that is not of the psycho-killer du jour variety is pretty clearly fantasy when using this criteria. Dracula for example relies on the existence of a creature that eats people's blood to live much longer than humans. The same criteria of relying on imaginary things can be applied to the wolfman, and everything written by H.P. Lovecraft.
Lastly, and most unpleasantly, there are the godawful supernatural romances. These things sadly rely on magical creatures like vampires and werewolves to push their poorly written, often somewhat pornographic narratives ahead. It almost makes me regret making the fantasy categorization so broad, as it includes a lot of godawful rubbish. Examples of this style of fantasy include the Twilight series and the Anita Blake series.
Fortunately, this classification system does have a redeeming feature, and it is that it brings in the classic epics and romances, such as The Epic of Gilgamesh or the romances of Chretien De Troyes. These works are considered classics, and are taught heavily at many academic levels. The ancient epics nearly always feature magic and gods, with few exceptions, while the romances feature evil witches and wizards and love potions. These epics and romances are actually the foundation for what most people refer to when they think of fantasy.
The idea of classifying things is so prevalent in modern society, especially with things like books. Part of this came about as a result of the publishing industry trying to make it easier for people to find books they like in a bookstore. However, this systemic categorization by publishers has left a great deal of things poorly sorted, and does a great disservice to the name of fantasy. It is by looking back in time that we are able to see that many of the distinctions we create are just that--created. When the wisdom of the ancients is consulted, it becomes clear that any attempt to divide fantasy up into smaller categories like science fiction and horror and romance are just that--fantasy.