What's the difference between literary and genre fiction?

I've been wondering for a while now what the distinction is between these two categories. Genre fiction seems to be fairly clear cut - fiction that falls into one of several specific types of story: Mystery, Romance, Fantasy, etc., with subcategories such as Historical Romance or Urban Fantasy. In general, these seem to follow a plotting template and be driven by external conflicts, such as a mystery to be solved.

Literary fiction seems harder to define. My personal understanding has been that it involves conflict that is primarily internal, and doesn't follow a formula or rush along a plot arc like genre (also called "commercial") fiction does.

I started reading Break Into Fiction which is a workbook-style guide to writing genre fiction that uses well-known movie plots for examples (such as Casablanca and Finding Nemo). The authors define commercial fiction according to a very strict three-point structure. Naturally, this makes me want to rebel and use two or four. ;0)

In the beginning of the book they have a glossary of terms, in which Commercial Fiction is defined as:

Fiction with a specific structure that includes a protagonist ... striving toward a goal with obstacles encountered... until they reach a do-or-die moment...The story ends on a positive note. Due to the events encountered over the course of the story, the protagonist...changes as a result. Commercial fiction derives from myths and fairy tales, and...is based on the reader's belief system that if they try hard enough they can... make a change in their world for the better.

They define Literary Fiction this way:

Not to be confused with literature, Literary Fiction is based on the reader's belief system that one cannot change their world but they can understand it better. The plot structure of literary fiction does not move toward a specific goal but involves peeling away the emotions and dark secrets of the human condition... The protagonist does not need to grow or change over the course of the story.

Well, that certainly explains why I have failed to enjoy many of the literary novels I've read. They seem depressing and pointless. But clearly they are deeply moving for other readers. On the other hand, many of the books I have truly enjoyed were those in which I could immerse myself in a leisurely way, without being whisked along from one improbable situation to another. such as Rosamund Pilcher's Winter Solstice, about a group of assorted strangers who spend Christmas together in an old house in Scotland. This is probably also "women's fiction," but it is certainly literary by this definition.

Many books overlap in similar ways, but tend to be more strongly one or the other.

What do you think about these definitions? How would you describe your WIP (work in progress)?