Genre fiction tends to be written and read primarily for entertainment. Though it may certainly aspire to and attain other goals, entertainment is the primary objective. However, as David Mamet points out in his essay, "The Humble Genre Novel, Sometimes Full of Genius," many works now considered great literature were originally genre novels. Raymond Chandler, of course, exemplifies this phenomenon. (Mamet goes so far as to open his essay with the line, "For the past thirty years the greatest novelists writing in English have been genre writers.")
If you're unsure whether your story or novel can be considered both genre fiction and literary fiction, it's worthwhile trying both camps. It certainly doesn't hurt to have more options for publishing your work, especially if you're not too proud.