Oh no. I have to define it?
According to Wikipedia: a genre of fiction in which magical elements blend with the real world. The story explains these magical elements as real occurrences, presented in a straightforward manner that places the "real" and the "fantastic" in the same stream of thought.
Makes sense right? Let's give it our own definition now. Let's start with like genres and work our way up. (These definitions are partially subjective and in my own words.)
Urban Fantasy is a world in which magic of some sort exists and either exists in tandem with ours without the "mortal world" knowing about it (think Harry Potter or Twilight), or exists instead of our world (what our world would be like if we all knew magic existed, like in the Sookie Stackhouse novels).
Paranormal Romance can have the same worlds and magic rules as Urban Fantasy but the main plot line is romance.
Paranormal: I've heard people say that Paranormal is not a genre without adding Romance to the end, but I'm a fan of defining something as Paranormal on its own or with a qualifier. For example, what would a time travel or ghost story be (without a main romance story line)? I call it Paranormal.
Magic Realism. One of the rules of Paranormal is that the magic in it usually has some sort of explanation of how it works and rules that govern it. For example, Harry Potter's world is explained, has history, and has specific rules that govern the magic and the people, therefore it's paranormal (or urban fantasy, or fantasy). Now, if you think about, say, Mary Poppins has Paranormal elements in it, but by no means is the world governed by specific rules. It is business as usual and we must take the magic stuff as it comes. Time travel and some ghost stories are the same. Time Travel has no other occurrences of paranormal in it; it just happens and we take it as is.
Now, here's why Magic Realism is so tricky. Because no on ever uses the term to describe something. You wouldn't describe Mary Poppins to someone by saying "It's a Magic Realism musical about a governess helping two bratty kids and their family get along and love each other." Likewise, a Time Travel is a Time Travel, it isn't described as Magic Realism. But, according to the definition I've just given, it would be.
I can't give many more examples of Magic Realism because, frankly, I'm not a big fan of the genre. Blame it on me liking rules to go with my weird stuff, but I prefer a world that is built up and in which characters must interact with it. So, when in doubt, leave Magic Realism out. If there is absolutely no other way to describe your ms, then use it. But, to me at least, Magic Realism conjures up images of weird stuff, the stuff of acid trip dreams better left in the dark. Paranormal elements I can handle and I feel they are much more telling than "Magic Realism."
What other books (or movies) would you describe as Magic Realism?