Genres are what YOU want them to be.
On my Sony reader, I started with SciFi and Classics as genres. But am dropping SciFi as my SciFi collections has GROWN. But I have added Non-Fiction, Aviation, and Fiction. I use these categories for smaller groupings of books, where I might not group by author or series (may not have a series). Fiction is used for one off books that I want to be able to find.
In pBook stores, genre allows you to look for similar books and discover new authors. If they were all mixed together, it would be much harder to find new scifi/fantasy authors to try, mixed amoung the general fiction, classics/liturature, etc.