Realistic fiction is kind of a newcomer to the long list of literary genres. Primarily aimed at children and adolescents (the corresponding genre in adult literature is usually just called "literary fiction"), realistic fiction is recognizable by its relatable characters and situations.
Characters deal with the things everyone else deals with—death, friendship, loneliness, embarrassment, first love—and they don't get transported to a make-believe island as a solution to their problems. They have to work it out, which is one of the main appeals of this genre; kids like to read about other kids (real or imaginary) going through the typical young person trials and how they deal with it.
Not that all realistic fiction is sad and gloomy. It's just what it sounds like—stories about real-life from a fresh perspective. Also, we aren't suggesting there are no realistic elements to a fantasy like The Voyage of the Dawn Treader: there are, which is precisely what makes reading that book so rewarding. It's just that real kids don't fight literal dragons, they fight bullies, or their own insecurities, or ferocious acne.
A lot of the best and most-loved stories fall squarely within the limits of realistic fiction. Huckleberry Finn wasn't a real pirate, but he really rafted the Mississippi; Anne Shirley wasn't a Medieval princess, but she really became Matthew and Marilla's daugher; Anna and Caleb Witting aren't big on imagination, but they are big on really accepting Sarah into their family (at least, eventually).
The full range of human experience is explored in these stories, its darkness, its light, its sorrow, its joy. This is the purpose of literature, after all: to show us true life, and in showing us, to better prepare us for it. These books are some of the best at doing just that.