Fiction was a type of literature that was written for entertainment rather than to inform. The term could also refer to a lie.
In a 2364 captain's log, Jean-Luc Picard described Whalen as a fiction expert. (TNG: "The Big Goodbye")
According to Picard, as of 2367, Tagus III was "a mystery that has invited more argument, more deduction, more speculation than the best works of fiction" (TNG: "Qpid")
Jake Sisko mostly wrote fiction. (DS9: "Nor the Battle to the Strong")
In 2373, Tuvok dismissed Tom Paris's suggestion that in Insurrection Alpha, his character and Kathryn Janeway's retake USS Voyager and execute the mutineers, saying it was "an entirely implausible plot development" and that Janeway would never do that. Paris reminded him that it was fiction, and logic shouldn't stop him from making the story interesting. (VOY: "Worst Case Scenario")
In 2377, the narrator of Photons Be Free reminded Janeway, who had been playing the holonovel, that although it was a work of fiction, it nevertheless contained elements of truth. (VOY: "Author, Author")