Folklorists - following the direction of the folk - make a distinction between folktales (long, multi-episodic, fictional stories that usually end in a positive way) and legends (shorter stories told to be believed and often ending in a horrible way). The term "fairytale" is problematic, but it refers to folktales.

Both folktales and legends are populated by the same spectrum of supernatural beings. People believed these entities existed, and they told legends about them that were offered as "proof" as to their existence. At the same time they told fictional folktales that featured believable elements - including these supernatural beings - and yet the stories were regarded as fictional be all concerned.

Belief did not different according to social status; belief was different according to the genre of the story being told.

edit: my assertion that the term "fairytale" is problematic inspired a PM that asked why I saw it that way; the answer may serve others that wondered the same thing:

The classic, "Grimm's Fairytales", is a poor translation of the original: "Kinder und Hausmärchen – Children and House Folktales". Märchen is properly translated as folktale, but the English-speaking world made it a smaller thing by translating it as "fairytale" - and this was occurring as the enter supernatural realm of folk belief was being transformed from a powerful, dangerous place into a cute, whimsical amusement. The folktales that were serious, literary forms of entertainment for adults, were being transformed into charming children's tales. In the mix of all these transformations, the term "fairytale" emerges as problematic because it fails to capture the majesty of the original folk genre of story.