Demystified

A myth is a sacred story from the past. It may explain the origin of the universe and of life, or it may express its culture's moral values in human terms. Myths concern the powers who control the human world and the relationship between those powers and human beings. Although myths are religious in their origin and function, they may also be the earliest form of history, science, or philosophy.

A folktale is a story that, in its plot, is pure fiction and that has no particular location in either time or space. However, despite its elements of fantasy, a folktale is actually a symbolic way of presenting the different means by which human beings cope with the world in which they live. Folktales concern people -- either royalty or common folk -- or animals who speak and act like people.

A legend is a story from the past about a subject that was, or is believed to have been, historical. Legends concern people, places, and events. Usually, the subject is a saint, a king, a hero, a famous person, or a war. A legend is always associated with a particular place and a particular time in history.

Definition by Donna Rosenberg, in her book Folklore, Myth and Legends: A World Perspective

Source:  http://www.indigenouspeople.net/stories.htm