The short story is the crystalline form of the novel; that is, it takes the essence of what makes a novel (character, plot, dramatic development) and condenses it into a form that is whole and pleasing. What the novelist accomplishes in two or three hundred pages, the short storiest, if I can coin that term, achieves in, say, twenty or ten or, even, one. Some authors have even written the one sentence short story (e.g. Hemmingway’s “For sale: baby shoes, never worn,” which consists of just six words!).
Having written both short stories and novels, I can say that there are definitive differences between the two. The novel is like taking a very long walk in a place you’ve never been. Whenever I go to a city I’ve never visited (my first trip to Jeddah in Saudi Arabia comes to mind), I like to spend days exploring both the main streets and the hidden alleys . The novel does the same: as an author, you have the time to meander and discover.
The short story does not afford such luxury, though a skilled writer can create that illusion, taking readers to new places ever so briefly, tantalizing them with just the right word or tone. Discovery, it seems, can be just as satisfying, if not more, in a flash.
The short story, I believe, harks back to the oral tradition, where entertainment consisted of the telling of a tale: in prose form or in ballad. Hence, Homer. Hence, Chaucer. Hence, 1001 Arabian Nights.