A fairytale is typically folklore and includes mythical entities or magic and enchantments.
Short stories: Fairytales are usually spoken and made for children. It's short to keep an attention span.
Contains magic: often means witches or wizards. It's not really a fairytale without some sort of magic.
Features royalty: fairytales is normally full of contrasts. If there is royalty, there is poverty. It's also because people tend to like hearing about royal lives.
The little guy wins: there are almost always the "losers" of the story, the one people don't care about. But they always come out on top, people like that progression.