An essay on the difference, and a possible NIMBY attitude towards the supernatural
To begin, what's the difference between science fiction and fantasy? Science Fiction is scientifically possible, but Fantasy is completely impossible. It sounds simple enough, but Philip K. Dick once pointed out that by that definition there is no difference because with Science all things are possible. We have no way of knowing what new things will be discovered in the future.
Isaac Asimov once answered this argument by pointing out that with Science, some things are more likely than others. He gave the example of how the genie in Aladdin could move an entire castle in the blink of an eye. That violates so many laws of physics that it's probably fantasy.
So is that the best we can do? Figure out what's probably fantasy, but could be Science Fiction given some unlikely discoveries?
Well, I heard another person point out that Science Fiction usually takes place in the future while Fantasy takes place in the past. It's an interesting observation and in a way, it makes me wonder if the true difference has more to do with History than Science. Is it possible that sometime in the future, we will discover the existence of dragons, unicorns, and goblins? Is it possible that we will discover some new physics which makes magic possible? The answer to both questions is yes, because with Science all things are possible. But we know for a fact that such things did not exist in the past. So when Tolkien or Howard tells you they did, they are writing Fantasy.
What about Horror?
Well, it's a little different if we define it simply as a story meant to scare the readers. A Horror story can be completely realistic. (For example, a story about a serial killer) It can be Science Fiction. (For example, Alien.)
But I think traditional Horror stories are probably Fantasy.
Wait! What do I mean by that?
I mean they involve things like vampires, werewolves, and ghosts. These things are scientifically possible, but not very likely.
But what about the setting? If Science Fiction takes place in the future and Fantasy takes place in the past, well, most Horror stories take place in the relative present. (I say relative present because these things depend on the reader. The Victorian setting of Dracula might not seem very modern to you, but remember that it was written over 100 years ago.)
That makes me wonder if there is actually a NIMBY (Not In My Back Yard) attitude towards the supernatural. Consider, when Tolkien or Robert Howard tells us about a time in the long past when magic, wizards, and monsters were real, we think about how much fun it would be to live in that time. Too bad, we were born so late, but when someone like Lovecraft or Stephen King tells us, "Good news! There are still monsters and magic in the world. There'll be a monster waiting for you when you take out the trash tonight. Have fun!", we get scared.
Horror stories can be humbling in a way.