On Fairy-stories originally started out as a one hour guest lecture Tolkien gave. He later expanded it to a 100+ paragraph essay the size of a short novella.
Right off the bat Tolkien explains that trying to define fairy story is perilous. He does, however, tell us what should not be considered fairy stories: tales that simply involve strange beings, travelers tales, dream tales, and beast tales. Tolkien does say one thing Man tries to do in fairy stories is to have communication with other living things
Tolkien goes on to briefly discuss the origins of fairy stories; he says that they are so ancient that you can trace back one single thread or event in history, but not the history itself. Does that make sense? Well better Tolkien explain it than me. He says Man are like inventors – the same mind that created the adjectives light and heavy also came up with the idea that to make a heavy object fly, you just have to make it lighter.
Tolkien finishes off with a brief discussion on the value of fantasy; he says the value of fantasy is the same as any type of literature. Tolkien was very specific in saying that the only medium that works for fairy story is word – drama and paintings/drawings don’t work with fairy stories.
One thing this essay is not is a how-to guide to writing fantasy as some reviews seem to suggest. If I had to classify it, it would simply be a defense of the fairy story.