A teenager in a novel-writing group I taught asked, "What is literary fiction?" That's a very good question, and those who've been in the writing field a number of years know the answer, but the definition is harder to put into words. Even dictionaries and writing guides have a difficult time defining it because the term has so many facets.
With literary fiction, the pace is usually slower and the tone can be darker than genre fiction. There is more concern for the style of the writing than is normally the case in other fiction, and style takes precedent over the plot or characters. Literary writers may feel they are the elite or the "purist" among novelists. This is enhanced by the fact they often have the support of some organization, college, or university. Common themes deal with social issues, political implications, or the human condition. Their main goal is not to entertain but to present an agenda or important lesson with quality writing.
The problem is that literary fiction, except in rare cases, is not as widely popular or as sellable as genre fiction. Of course, if a book receives a major award, such as the Nobel Prize for Literature, it becomes very sellable. Some controversy may also bring it to the forefront for a time. But there is an audience for all kinds of literature, and writers should find the niche that will work best for them.
_____________________________