A fantasy is something you imagine, which might involve dragons, unicorns, or an imaginary best friend. If you live in a fantasy world, you're not worrying much about reality — pleasant, maybe, but not very practical.
Fantasy is dreams and imagination. In a football fantasy league, you can create your own dream team. In literature, fantasy — a genre similar to science fiction — might include a story about a three-headed squirrel and a bionic aardvark who fall in love on a planet made entirely of strawberries. Romance can be fantasy, too, according to a Billy Joel song: "It's just a fantasy. It's not the real thing. But sometimes a fantasy is all you need."