Stock phrases, including "Once upon a time," were used by storytellers to let the audience know that they were about to hear a folktale, a matter of fiction. In general, western and northern Europeans told two types of stories - folktales and legends. Legends were to be believed, and folktales were the oral novels of the folk. Boundaries were often blurred so definitions are challenged by specifics, but the dichotomy is useful in classification.

The "once upon a time" open phrase indicated that there was no insistence that the story "actually happened" at any time. Similarly, these stories would end with a device to let people know the fictional story was at a close. "And they lived happily every after" is most familiar to modern audiences. I always liked the common Irish close: “Tá sé go máith, agus níl sé go dona” - "It is good and it isn't bad."

The following is text I used for my folklore classes, excerpted from my teaching manual, Introduction to Folklore:

European folklorists, following the lead of the folk themselves, have long recognized two forms of oral tradition, Sagen and Märchen, legends and folktales. While there are many other forms of oral tradition, legends and folktales stand in opposition to one another, yet share a great deal. In reality, lines can blur.

Legends – or Sagen as the profession often prefers – are generally short, single-episodic stories told chiefly in the daytime. More importantly, the teller intended the listener to believe the story. Legends often have horrible ending to underscore the story’s important message. A large number of them are, after all, typically meant to be instructive, to serve as warnings in some way. These types of stories are not necessarily long-lived. Their point is to reinforce and prove the legitimacy of a particular belief. Nonetheless, some legends take on a traditional character, can become multi-episodic, and migrate over considerable spans of time and space.

Folktales – or Märchen, again using the German, technical term – are longer stories with more than one episode. They are restricted, in theory at least, to evening presentation. A folktale is not to be believed, taking place in a fantastic setting. The European folktale also requires a happy ending, the cliché of “happily ever after.” Any given folktale can be told with considerable variation, but they are traditional in basic form, and folklorists have spent decades tracing the history and distribution of these stories.

A word here about the term “fairytale” is appropriate. At the end of the eighteenth century, various writers, most prominently the Grimm brothers, began publishing children’s stories based on folktales. These collections became extremely popular, particularly among the urban and increasingly literate emerging middle class as it found itself removed from the peasant soil that served as home to the stories. Fairytales often cause misunderstandings. In a culture that knows more about fairytales than Märchen, people assume that the folktale was intended for children. This is certainly not the case since the stories were often violent or sexual in ways thought inappropriate for children. Indeed, the telling of a folktale was usually delayed until the children had gone to bed. While fairytales provide the modern reader with the easiest access to the many stories that were once told internationally, one should always realize that they are removed from the primary inspiration. The original stories and their content provided serious entertainment for adults and they were part of an oral tradition, not something that was fossilized in writing.

The evolution of published fairytales had a profound effect on the subject of fairies, elves, trolls, and similar entities. Because fairytales became the literary domain of children, many people – including later writers – assumed the same was true of the supernatural beings. In their original context, nothing could be further from the truth. These were not cute, diminutive creatures whose sole purpose was to delight children. They were powerful, dangerous, and capable of great harm. The European peasantry feared and respected them, and their stories underscore this, conveying in uncompromising terms the code of ethics and behavior that one must employ to survive an encounter with the dangerous world of magic and power.

The definition proposed here for “fairytale” does not necessarily coincide with how people – and even some folklorists – use the term. Some scholars regard “fairytale” as appropriate for the more fantastic expressions of folktales as they were told by the folk. The reason why the term is not used in that capacity here is because the folk did not refer to these stories as fairytales and because the term implies a degree of innocence that is inappropriate; again, “fairytale” is most suitably reserved for the published children stories that gave literary expression to the adult oral fictions of the folk.

Besides the legend and the folktale, there is also the folk ballad, a specialized form of oral tradition that, like the others, incorporated a wide range of beliefs. The ballad had roots in medieval Europe, combining narrative and song. The ballad usually focused on a single incident, and it almost always emphasizes action.

Something also needs to be said here about myth. People use this term awkwardly. In a European context, myths tend to be the artificial constructs of ancient and Classical-era priests or literate people who sought to weave folk traditions into a comprehensive whole. The exercise often had political purposes, designed to provide diverse people with a single set of beliefs and stories. By reconciling similar traditions, the shared culture of these groups could be seen as more important than the differences, justifying the central rule of the king and his priests. Myth is also a way of organizing and reconciling folk traditions, which by their nature can be contradictory and highly localized. Myth tends, however, to make gods of supernatural beings, giving those powerful entities a status – for modern readers – similar to the Judeo-Christian-Islamic God, even when this comparison is not justified. Of course, it is also important to point out that myths were stories that were told – and then written down – and they were different from religion itself. Many myths were simply the shared cultural inheritance of a group of people.

In general, the word myth is best set aside when discussing more recent folk traditions, recognizing its proper status as a literary genre. Nonetheless, ancient documents recording myths can assist in understanding the history of various stories and beliefs. The authors of these texts were, after all, the first folklorists, and they were the only ones coming close to practicing the craft at the time.

Some folklorists carelessly use the term myth to denote those legends that deal with a fantastic, remote time. This primal era saw the creation of many familiar things such as day and night, fire, animals, people, mountains, and all other aspects of the present world. Folklorists properly refer to these stories as etiological legends explaining the origin of things. Sometimes, however, people interchange etiological legends with the word myth. The problem with this is that “myth” can imply something that is inherently wrong, linked to “primitive” superstitious beliefs. When the term “myth” is used for the folklore of existing cultures or for the traditions that were viable only a generation or more ago, it can take on an insulting, derogatory tone. It is best to reserve the word “myth” for ancient and Classical-era texts.