Fiction is a collection of various stories which are not completely accurate retellings of events in reality. In other words, fictional stories are stories which are not true, although they may be based on true events.
There are two main types of fiction, realistic and unrealistic, which is pretty self-explanatory.
To Atheists, most religious stories, such as those contained in the Bible, the Qu'ran, etc. may be considered unrealistic fictional stories. Also Christians think the Qu'ran is fiction, and Muslims think the New Testament is fiction.