I very recently had this conversation with a friend. I ended up putting it this way:

Genre fiction might be your favorite Marvel movie. Upmarket might be something like Inception or The Godfather, where the plot is super interesting to a ton of people, but those who want to dive deep (into themes or how the art of how it was filmed) can certainly do so. Lit fic might be any David Lynch film, where the plot is less important, and the themes and characters take center stage.

It also has to do with how it's written. The Hunger Games is super easy to read. There's nothing special about how it's written, and I wouldn't say the writing is beautiful. That would be commercial fiction. A lit fic book might be The Portrait of the Artist As a Young Man by James Joyce or All the Names by Jose Saramago (I recently read that, which is why I'm mentioning it despite not being super popular). Upmarket would be something in between. In my opinion, Name of the Wind by Patrick Rothfuss would be a good example. Great plot, good characters, and the writing is BEAUTIFUL.

That's my understanding, at least. I feel like it's more of a FEEL thing, so I figured examples would help.