A fairy tale is a magical story for children, like "Cinderella" or "Rumpelstiltskin." If you read a story that begins, "Once upon a time," chances are it's a fairy tale.
A story doesn't have to include any fairies at all to be considered a fairy tale. Fairy tales are typically full of magic spells, princesses, talking animals, evil queens, witches, and goblins. Disney would probably not be in business if it weren't for fairy tales. You can also use the word to describe some part of real life that seems almost magical, like a "fairy tale romance."