I would categorize any fantasy that happens in roughly our real world/within the past 20 years as Urban Fantasy.

My favorite two Urban Fantasy authors are:

1. Charles de Lint: All of Charles de Lint's work, a mega collection of novels and short stories, qualify as Urban Fantasy in my opinion. But it is his Newford (a city in modern-day Canada around which a large number of his tales are based, that form the basis of his strongest work. A combination of indigenous magic/magical characters that are Indian based upon the North American continent and magic transplanted from celtic traditions by the peoples that came from Europe make for a truly unique magical system that is compelling and endearing.

2. The Greywalker series by Kat Richardson. In my opinion, this series is quintessential urban fantasy. Private detective Harper Blaine has a near death experience that leaves her able to see and experience the supernatural in her urban home of modern day Seattle. Richardson's work is less literary and more light reading than Charles de Lint -- I'm guessing more of the level of Jim Butcher for example, but I really like the story and main characters. And by the fourth book, Richardson begins to shape out a mythology arc that I find enriches the experience the books' supply.