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A strict definition would be pretty hard. Personally, I consider literary fiction to be fiction written by people who give the craft of writing their top priority. Genre writers (SF, romance, thriller, mystery, etc.) can get away with simply telling a story, or creating compelling characters and putting them through their paces (so-called "franchise novels"). Some genre writers are really good writers, some...not so much. Expectations for the writing itself seem to be lower in genre work; if you stick with the conventions of your genre and your prose is serviceable, you can have some success.
But literary fiction is not just old, boring stuff that's "good for you." There are plenty of great writers working in the genre now. If you want purity and gravitas, it's out there (yeah, Jonathan Franzen, I'm talking to YOU), but there are also plenty who can write their asses off and tell an engaging story at the same time. I'm partial to (off the top of my head) Michael Chabon, Jhumpa Lahiri, Kazuo Ishiguro, Michael Ondaatje, and Richard Russo, but what each of us like is a matter of taste. The problem here (and in most other realms of life) is when we start confusing our personal tastes with objective fact.
I disagree completely with the article cited by the OP. I thought that concluding paragraph was complete and utter BS, like the author had been forced to read some Thomas Pynchon, was really, really angry about it, and decided to make some idiotic generalizations about a genre of which he knows (to be generous) next to nothing.
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