Animal Farm is a fable because it is a morality tale using anthropomorphism, or animals who act like humans. Most fables use animals to convey their lesson.
A fable is usually “a brief, succinct story that is meant to impart a moral lesson” (enotes reference, fable). Orwell wrote Animal Farm to tell a cautionary tale about communism using the Russian Revolution as a backdrop. By using animals, Orwell was able to make his “fairy story” a traditional fable. Fables usually use anthropomorphism, or description of animals as humans, to appeal to children. Orwell plays on this in his parody.
Orwell also extends the concept of anthropomorphism by having some of his characters become more and more like humans. At first, the pigs oppose mankind and everything related to humans. They slowly become more and more like them, until no one can tell the difference. The other animals remain animals.
The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which. (ch 10)
Because Animal Farm is a fable “the reader can surmise that the story told in Animal Farm is universal, with implications for every culture or country, and that it will be easily understood” (enotes Animal Farm, style). In addition to the parody of the Russian Revolution, Orwell wanted to warn people of the dangers of capitalism as he saw them.