I think Magical Realism is, for instance, when magic or the supernatural briefly intrudes into a mundane setting and the characters don't really question it, even though magic is not usually a part of their world.
It's as if you wake up one morning and find some fabulous beast in your backyard, and you think, "Oh, I've never seen anything like that before," and you go to work without worrying about it too much, only to come home and find that it's eaten your cat. So then you call Animal Control at your local police department and ask them to take it away, but they say, "Sorry, we only handle domestic animals, not wild ones." Which means that you have to try a whole series of different ways to get rid of it, but none of them work, until, mysteriously, you wake up on another morning and the beast isn't there. So you spend the rest of your life looking for another one like it, but you never do.
Or you're the man who owns a little grocery store, and you think your mother-in-law is working spells on you. You suspect she's always slipping things into the tea she always insists you drink when you visit her house, and you've almost caught her a few times, but never quite. Also, she always smells like Chinese herbs, hemp, and old socks. You tell your best friend and he says, "Well, mothers-in-law will do anything. Mine always sneaks into our house when we're away and does all the cleaning. I wouldn't mind, but the last time she threw away my favorite t-shirt, the one I had since High School." It keeps troubling you, so you go to the library and search all through the stacks until you find a single book about magic written in the 1930's. There is nothing there that can help you, but you decide to find out if the author of the book is still alive, and write to him and see if he has a solution to your problem. He writes back and says he isn't a magician, he wrote the book because he's an anthropologist, but there is a spell that the natives in Peru use to repel hostile magic. You try the spell and after that your mother-in-law is just a sweet little old lady, but you never know for sure if she was really a witch and your spell worked, or it's just that her disposition mellowed after she won $20,000 in a lottery.
Sort of like that, if I understand the genre correctly.