In fact, I am narrowing Tolkien’s definition of fantasy quite a bit, and may perhaps have included too much of the “how” in the “what”. At any rate, Tolkien’s definition of fantasy may be got from his excellent essay “On Fairy-Stories” (to be found in The Tolkien Reader), and, in particular, in the following excerpt from the essay:

The achievement of the expression, which gives (or seems to give) “the inner consistency of reality,” is indeed another thing [other than Imagination], or aspect, needing another name: Art, the operative link between Imagination and the final result, Sub- creation. For my present purpose I require a word which shall embrace both the Sub-creative Art in itself and a quality of strangeness and wonder in the Expression, derived from the Image: a quality essential to fairy-story. I propose, therefore, to arrogate to myself the powers of Humpty-Dumpty, and to use Fantasy for this purpose: in a sense, that is, which combines with its older and higher use as an equivalent of Imagination the derived notions of “unreality” (that is, of unlikeness to the Primary World), of freedom from the domination of observed “fact,” in short of the fantastic. I am thus not only aware but glad of the etymological and semantic connexions of fantasy with fantastic: with images of things that are not only “not actually present,” but which are indeed not to be found in our primary world at all, or are generally believed not to be found there. But while admitting that, I do not assent to the depreciative tone. That the images are of things not in the primary world (if that indeed is possible) is a virtue, not a vice. Fantasy (in this sense) is, I think, not a lower but a higher form of Art, indeed the most nearly pure form, and so (when achieved) the most potent.

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