For me, urban fantasy is fantasy set in, duh, urban areas, in cities. Frequently the location is as much a character as it a setting. The stories are infused with hints of faerie and myth, both European and Native American, and when you finish reading, you can almost glimpse the fantastical out of the corner of your eye.
The Borderland anthologies were among the earliest urban fantasy, about the mythical Bordertown that existed on the cusp of this world and the Faerie Realm. Revisiting Bordertown in this anthology after so much time (the most recent anthology was published in 1998) was a delightful trip, the chance to check in on old friends and make new ones. The list of contributors is impressive and includes Charles de Lint, Neil Gaiman, Jane Yolen, Patricia A. McKillip, Emma Bull, and Cory Doctorow. (You can see the full list of contributors and read a few of the stories here.) Highly recommended