The fact of the matter is simple. The difference between literary and commercial fiction is - well - commercial. Here's a great infographic on the topic. After all, it's only agents, publishers, distributors and store owners who need to know which shelf your story/book/First Masterpiece belongs to - whether they should market it as literary fiction (Saul Bellow, Angela Carter, DFW), or commercial fiction (Jill Mansell, Jodi Picoult, John Grisham), or even "upmarket" fiction (Khaled Hosseini, Haruki Murakami, maybe Jonathan Franzen?). So, really, the difference between these two (or three) is arbitrary for the writer. The writer need only write their heart, and sometimes their imagination takes them to wild lands with forest pixies (commercial; fantasy) or heavy-hitting legal battles between the individual and the state (commercial or literary, depending on subject/style/political context).
Okay, I admit it, the real motive for this post is to remind myself to stick my uppity attitude about literary/commercial fiction right in the gutter, and tell myself it's just as well to read Jill Mansell as it is to read Lee Harper.
Besides, Jane Austen and Mary Shelley never pitched themselves as 'literary' versus 'commercial' fiction - and now they both make permanent appearances on the Classics shelf. Which just goes to show you something about the arbitrary and changeable nature of categories like 'literary' or 'commercial' or 'upmarket'.