A folk tale is an old story that is known to many people within a particular culture, usually being passed from one person or generation to another by word of mouth. Folk tales are typically based on real events, but have been changed over the course of successive retellings so that it is hard to separate fact and fiction, and they may grow to incorporate fantastical elements that could not possibly have happened.
Folk tales are similar to myths, though myths usually incorporate more obviously fantastical elements. The folk tales surrounding Robin Hood, for example, could theoretically have happened in the form they are told, but tend to exaggerate his skill as a bowman beyond normal bounds of credulity. It is possible that some myths began as simpler folk tales and then grew into myth over the course of hundreds of years of retelling among superstitious people. Myths tend to have no provable historical basis, whereas folk tales tend to be rooted in events and figures of which there is at least some record - for example, Dick Whittington was a real person whose life was amply recorded, even if the folk tales surrounding his life have departed somewhat from what is true or even believable.
Many fairy tales are based on old European folk tales. Both are a popular source of plots for adaptations such as films (e.g. Disney cartoons), children's stories and pantomimes. In addition, since folk tales are known to most people in a particular culture, literary critics have often been able to link the characters and events in many apparently different works to archetypes present in folklore.
New folk tales are still being created. For example, there are stories surrounding such figures as Gandhi, Mother Theresa and Che Guevara that go beyond strict historical fact and may tend to exaggerate their qualities.