I am guessing that it refers to a type of literature in which magical or
supernatural or visionary things occur in an otherwise realistic context,
and in a way that enhances the realism rather than detracting from it.
Your "guess" is pretty much on the nail and would get you full marks on
a World Literature 101 midterm. Far from being coined here, it's a
standard term for a literary style developed mostly by 20th Century Latin
American writers in which magical events occur in a realistic context.
Gabriel Garcia Marquez was one of it's most noted devotees, although
his recent works have not really employed it. Chris has quoted from his
classic "One Hundred Years of Solitude" ("Cien An~os de Soledad")
on NoEXP, which takes place in the isolated village of Macondo in the
South American jungles, and has a great deal in common with NoEXP in
tone. A notable recent example in both the book and the film versions
is "Like Water for Chocolate" ("Como Agua para Chocolate"), where emotions
are transfered to food and experienced by those who eat them.
Bill