A novel is a piece of literature written in narrative prose. Prose is different from Verse. Verse is the style of poetry - even dramas and histories had always tended to be written in verse: think Beowulf, The Odyssey, and The Canterbury Tales.
Most cite Cervantes' Don Quixote as the first novel in 1604, but the novel as a genre did not gain popularity until more than a century later. Novels gained popularity in the 18th and 19th century in England with books such as - Robinson Crusoe (1719), Pamela (1750), and later with novels like Jane Eyre (1847). As the middle class expanded, so did readership in general with an increasing amount of those reading novels. Novels continued to increase in popularity, eventually becoming as, or more, read than poetry. Fiction has sort of become synonymous with "novel." However, Fiction is just a type of novel: others are nonfiction, epistolary, and historical.
A "Novel" is a narrative in prose with a specific setting, plot, rising action, climax, declining action, and characters to portray it.
In the English language, the term "novel" did not come to be of household use until the 1740's and later on in the 18th century, as Romances, Histories, and other genres were still taking most of the works of the time.
The first English Novel, as accepted within theory was written in 1688 by Aphra Benn Oroonoko or The History of the Royal Slave.
As far as popularity goes, however, it is accepted that the Robinson Crusoe by Daniel Defoe was actually the work (1718) which set the wheels in motion and began the novel writing movement in all of England.
Yet aesthetically and in form, the first English novel that is accepted as modernist was Samuel Richardson's Pamela (1740).
Being that the 18th century began the formal introduction of the English Novel, the themes began to adapt from the enthralling and captivating fiction to more of a mirror of society.
This is how you move from the 18th century Robinson Crusoes and Fielding, Defoe, and Chaucer to the 19th century commedies of manners of Jane Austen and Charles Dickens which, instead of removing the reader entirely from the present perspective through fiction and storytelling, they want to keep you in a realistically fictional stage exposing issues and making their own witty observations.
The move has been gradual and representative of its social changes, but it has mirrored universally the mental and psychological state of its writers for over 300 years.