The primary difference between creative nonfiction and fiction is a very simple one: Fiction is the product of an author's imagination, while creative nonfiction deals in facts. An author of fiction receives more creative freedom in this respect. A novelist or short story writer may include as much history as he pleases into a novel, or he may draw upon his own life for a story idea. No matter how much he borrows from life, however, he can always feel free to invent wherever and whenever he feels it necessary. An author of creative nonfiction, on the other hand, must always stick with the truth -- she may go beyond the "facts" and speculate or make conjectures, but that fact must always be obvious to the reader that she is doing so.
Because most fiction tends to be plot and or character driven, prose in novels needs to be serviceable, not flashy, which causes many novelists to employ a utilitarian prose style, one that serves merely to streamline an author's ability to convey plot and character details. Authors of creative nonfiction, on the other hand, often try to use their prose style to distinguish them from other writers, which is often the case with seemingly mundane genres such as travel writing. Patrick Leigh Fermor and Alan Booth both wrote travel books as famous for their prose as for the journeys they relate, which is also why so many novelists who are also great prose stylists have eventually turned to memoir writing: Evelyn Waugh, Vladimir Nabokov, John Updike and Martin Amis are all examples of acclaimed prose stylists who also tried their hands successfully at memoir writing.
While the novel is a relatively established form in Western literature, dating back to the late 17th Century or so, creative nonfiction as it is today understood did not exist until the 20th Century. Many literary critics consider Miguel de Cervantes' "Don Quixote," published in two parts in 1605 and 1615, the first novel; others nominate Daniel Defoe's "Robinson Crusoe," published in 1719 as the first novel instead. Either way, classic works by George Orwell, James Baldwin, Joan Didion and other luminaries of creative nonfiction did not appear until well into the 20th Century.
One interesting case in the history of creative nonfiction is that of James Frey, who published "A Million Little Pieces," his memoir of drug and alcohol addiction in 2003. Frey's book eventually sold millions of copies, in no small part due to Oprah Winfrey's selection of it for her book club and her subsequent promotion of the memoir on her talk show. When the fact became clear years later in 2006 that Frey had fabricated large parts of his memoir, Oprah rescinded the novel's Oprah's Book Club Status. She also asked Frey to appear on her television show to explain himself to her viewers. Frey agreed to the interview, and his editor Nan Talese also participated.