At the request of the Man Booker Prize folks, Neil Ayres has published an essay on the topic of Magic Realism. It's a nice read; I heartily recommend it.
Among other matters, Neil mentions a British "class system" for novels. The same exists in the US, with one puzzling exception: it's okay for anyone on this side of the Atlantic, even the pretentiously literary, to admit to a fondness for mysteries. (This wasn't always so; folks like Raymond Chandler weren't taken at all seriously in the US in their prime, though the British critics were quick to recognize his talent.)
Part of what Neil grapples with in the essay is why writers like Jonathan Carroll and Neil Gaiman aren't considered Magic Realists. I'd never really thought about this before. Gaiman I can explain away as writing too much straight-ahead fantasy. But in the case of the vastly underrated Carroll, I have to confess that Magic Realism is probably the best description of what he is doing. God knows that his distinctive books don't fit comfortably in any other category I can name.