Magic realism is a genre of art which endows otherworldly significance to ordinary things. The suggestion of death, the hint of history invading the present, or the sense of inanimate objects coming to life is woven into mundane reality.

Robert Vickrey 1926-2011

The movement goes back at least to the 1920s and originated in literature, with a special vitality in Spanish speaking countries. In painting, the movement was defined by the “Magic Realism” show of 1943 at New York’s Museum of Modern Art. The curators describe artists using "sharp focus and precise representation" to "make plausible and convincing their improbable, dreamlike and fantastic visions."
George Tooker, "Government Bureau," 1956
One of the ground rules to magic realism is that the dreamlike effect has to happen without any overtly fantastical elements, such as dragons, space ships, unicorns, or trolls—or even fantastical effects, such as glowing rays, levitation, or morphing.

"Spring" by Andrew Wyeth, 1978
Andrew Wyeth often combined familiar things from his world in strange ways, such as showing the aging Karl Kuerner lying in one of the last bits of snow on the field opposite his house to suggest the death and rebirth of spring.

Gary Ruddell, born 1951
Among contemporary artists, not everyone fits the description of "sharp focus and precise representation." Sometimes motion blurs and simple backgrounds convey the magic, as with the science-fiction-cover-artist turned gallery painter Gary Ruddell,  whose paintings often deal with points of decision, rites of passage, and the inability to communicate.

Among contemporary photographers, Gregory Crewdson stages off-kilter scenarios of ordinary people in everyday surroundings, but often in states of undress or with weird lighting that he carefully sets up in Hollywood-style shoots. It looks almost plausible, but strangely otherworldly.

In film, magic realism (or the more recent term "magical realism") might include Jean-Pierre Jeunet's Amélie, Jan Jakub Kolski's Venice,  and Alfonso Arau's Like Water for Chocolate.

 
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