The Iliad is almost always referred to as an "epic," or as epic literature or poetry. The word Epic in literary terms means a long work where the characters and events are larger-than-life, and the langauge is specifically written to extol and praise legendary and historical events. By this definition, Ihe Iliad is certainly an epic; it concerns the dispute between Agamemnon and Achilles, and some of the history and events surrounding the Trojan War. The language and the characters are all heroic in nature (some of the characters are descended from literal Gods) and the story is quite long.
Sing, O goddess, the anger of Achilles son of Peleus, that brought countless ills upon the Achaeans. Many a brave soul did it send hurrying down to Hades, and many a hero did it yield a prey to dogs and vultures, for so were the counsels of Jove fulfilled from the day on which the son of Atreus, king of men, and great Achilles, first fell out with one another.
(Samuel Butler, The Iliad, classics.mit.edu)
Here, in the opening, the author entreats one of the nine Muses to remember and recount the heroic tales of the Trojan War. He is calling directly on the child of a God, and so presumes that his story, and his memories, are worthy of that level of attention. Even in the first paragraph, Achilles is exalted; he is "son of Peleus," a lengendary hero who accompanied Hercules and Jason on the Quest for the Golden Fleece. Agamemnon is "the son of Atreus, king of men," showing his noble heritage. The remainder of the work follows this pattern, explaining lineages and showering the characters with powerful praises. Unless the definition of the term is changed, The Iliad should be properly classified as an epic work.