A terrific synopsis, from Kristen Lamb, of genre writing is, and why it’s important to understand and choose which genre you’re going to be writing under.
Her definition of literary fiction is dead-on. An excerpt:
Literary Fiction is character driven. The importance is placed on the inner change, and the plot is the mechanism for driving that change. Literary fiction has more emphasis on prose, symbol and motif. The events that happen must drive an inner transformation.