Why is the Lady of Shalott called a "fairy"?

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Tennyson's "The Lady of Shalott" is set in a dream world influenced by Arthurian romance, rather than in the Victorian England in which Tennyson lived. The stream beneath the tower flows to Camelot, and Sir Lancelot appears riding by. Of all the magical elements of the poem, the Lady herself—who has no name, lives in a tower, and is cursed never to look out—is among the most unrealistic. She is a supernatural or symbolic being, who apparently never eats, sleeps, bathes, or does any other normal activity, but instead sits weaving night and day.

The poet describes her as singing "like an angel" before having the reaper identify her as a "fairy." The term "fairy" emphasizes her being a creature of romantic imagination rather than an ordinary woman. The term is chosen to evoke in the reader a sense of the otherworldly, magical, and mysterious. Moreover, it emphasizes how the story of the poem resembles the stories of fairy tales, which have many of the same dreamlike and mysterious elements.

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The weary reaper, in the moonlight, listening to the Lady of Shalott sing, likens her to a fairy. As the poem states:

Beneath the moon, the reaper weary
Listening whispers, ' 'Tis the fairy,
Lady of Shalott.'
The poem implies that the reaper thinks of her as a fairy because he likes the enchanting sounds of her clear and cheerful voice drifting through the night. The word fairy, however, also points to the fact that the Lady of Shalott lives under an enchantment. She is not merely an ordinary mortal, but a woman who is imprisoned in a tower. She is not allowed to turn her head and look at the city of Camelot, or she will die. Instead, she has to observe any events going on through a mirror. She is not allowed to interact with other people.
Although she is, in fact, a human being, the reaper's words show that she exists in a separate, unseen world, like a fairy from another realm.

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