Modern fantasy is broken down into the following categories: In this category, stories deal with creatures like faeries, trolls, gnomes, or simply "little" people. These stories often look at life from the perspective of these creatures and often deal with the complications that arise when the little and big world come into contact with each other.
Articulate Animals
In this category, animals talk like people and have human emotions but still retain animal qualities. Often the animals become caricatures of the human quality they portray (i.e. the sneaky snake, the sly fox, the wise owl, etc.).
Toys
In this category, the stories are told from the point of view of children's toys. This is an easily suspended disbelief for most children, since many already treat their toys as if they are real.
Preposterous Characters and Situations
In this category, the impossible is very possible and likely. Cars and nannies can fly, you can ride in a giant peach, and tongue twisters lie around every corner.
Strange and Curious Worlds
In this category, Earth as we know it is left behind. The laws of physics, nature, and conduct are often different from what we are used to. These worlds often have their own language and belief systems.
Little People
Spirits Friendly and Frightening
In this category, the stories focus on ghosts and other visitors from the great beyond. Sometimes these spirits or beings are friendly, many times they are malicious.
Time Warps
In this category, characters travel backward or forward in time, or sometimes both. Generally these stories allow the readers to consider what the future might hold, or look back at past events, and think about why they happened. Often characters that travel back in time make life changing discoveries or insights.
Science Fiction
In this category, science and technology run the show. The incredible places visited and things done are usually due to machines and technology. This is an often misplaced category, as it often fits more than one slot. There is almost one constant with science fiction: Just about everything that occurs is can be traced to Man's development of technology to allow him to do the impossible.
Information from: http://www.associatedcontent.com/article/704603/what_is_modern_fantasy_fiction_pg2.html?cat=38