History
Giambattista Basile retold many fairy tales in the Pentamerone, an aristocratic frame story and aristocratic retellings. From there, the literary fairy tale was taken up by the French 'salon' writers of 17th century Paris (Madame d'Aulnoy, Charles Perrault, etc.) and other writers who took up the folktales of their time and developed them into literary forms. The Grimm brothers, despite their intentions being to restore the tales they collected, also transformed the Märchen they collected into Kunstmärchen. (Literary fairy tales were not unknown in the Roman era: Apuleius included several in The Golden Ass.)
These stories are not regarded as fantasies but as literary fairy tales, even retrospectively, but from this start, the fairy tale remained a literary form, and fairytale fantasies were an offshoot. Fairytale fantasies, like other fantasies, make use of novelistic writing conventions of prose, characterization, or setting. The precise dividing line is not well defined, but it is applied, even to the works of a single author: George MacDonald's Lilith and Phantastes are regarded as fantasies, while his "The Light Princess", "The Golden Key", and "The Wise Woman" are commonly called fairy tales.
Read more about this topic: Fairytale Fantasy
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