Isn't what matters that it's a great story well told?

Indeed. It seems to me that it's a distinction that's useful primarily to marketers and not much of anyone else.

If there's a difference in the work itself, I'd say off the top of my head that "genre" fiction tends to start off with slightly more outlandish (not the right word, but I'm too busy to find another) "what-ifs" than "literary" fiction. (To borrow from the aforementioneded Zone One: "What if Zombies took over Manhattan?" rather than "What if there's this disaffected guy who has to work his way through a difficult job in a military zone?")