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The story shares many characteristics of folklore, including a strange group of people living isolated in the mountains, unexplained magical happenings, and the lack of a religious or otherwise deliberate moral. Rip does not come to an epiphany through his experiences, instead actually discovering that losing years of his life is positive. The story is also stylized as a story told to others, like a campfire story, and so can be altered and modernized without losing its important aspects. It also contains powerfully descriptive language that offers visual imagery over dialogue and character; this allows the story to sound more mythical:
Passing through the ravine, they came to a hollow, like a small amphitheater, surrounded by perpendicular precipices, over the brinks of which impending trees shot their branches, so that you only caught glimpses of the azure sky and the bright evening cloud.
(Irving, "Rip Van Winkle," bartlby.com)
The story also resembles an urban legend (Wikipedia) in that it could be a story about almost anyone in any place; people could relate the characters as known to friends or "a few years back" without trouble. The story acts in this way as an invented folktale. Interestingly, the story shares aspects with "Peter Klaus," by Nachtigal, and the Hebrew legend of Honi ha-M'agel (Wikipedia), both of which involve a person who falls asleep and wakes many years later to find that everything familiar has changed.
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