Medieval Fantasy is an overworked beast. It's not that the swords, sorcery, and dragons genre doesn't have stories left to tell. I, myself, am writing a dark fantasy series and still enjoy such as Rob J. Hayes' The Ties That Bind and Kenny Soward's Gnomesaga. The success of George R.R. Martin's stories involving politics, intrigue, and dragons show there's plenty of life in the old boy yet. It's just that a lot of authors never try to move beyond it when they set down to write fantasy, which is ironic given the premise of the genre is unbinding your mind from reality.
During the 1970s, shelves were covered in rewrites of J.R.R. Tolkien's original epic. Most of these works have been forgotten. In the 1980s, this flood shifted to becoming pastiches of Dungeons and Dragons with TSR putting out hundreds of books set in their various settings. The D&D rules system eventually gave rise to Final Fantasy and World of Warcraft, which has now permanently left a scar on our fantasy subconscious. I say this as a person who owns all of WoW's books and devoured TSR's novels like Happy Meals growing up.
This isn't to say that original works haven't been created in that time. God knows, there's plenty of gold amongst the dross. Stephen R. Donaldson created the antithesis of the "journey of a Modern Protagonist to fantasyland" in the Chronicles of Thomas Covenant books. George R.R. Martin set the world on its head with his sex and violence filled deconstruction of Medieval life. It's just that a little more variety would be welcome. George Lucas made a billion dollars just by transplanting a typical fantasy story to space. Stephen King's the Dark Tower series is out there but remains as strong an alternative fantasy series as exists due to it's collision of American fiction tropes.
Which is why I like urban fantasy.
Urban Fantasy is, literally, fantasy stories set in cities of the modern era. I separate this from "Fish out of Water" stories where a Modern Man heads to the past. A Connecticut Yankee in King Arthur's Court, Ultima, and the Chronicles of Narnia are just fantasy stories in my mind. Urban fantasy has some overlap with magical realism, paranormal romance, and horror but is really its own thing. I also think it's different from Harry Potter in that, aside from brief visits to the Dursleys, it's all set in the wizard's world.
No, I think what separates urban fantasy from other worlds is the idea that the protagonists are living in 'real world.' It doesn't have to be a strict one-to-one ratio. Vampires could have "come out from the coffin" and magic-users could be as common as Doctors but people still live in the United States and go to the movies. I think urban fantasy can be directly compared to comic books where the world is filled with mutants, aliens, and monsters but life more or less goes on as normal. The real world + [insert fantastic elements] setting adds a lot of credibility to the storytelling in my view.
Next, I believe a major element of urban fantasy is there's a balance for the darkness. Hellblazer, the seminal occult series by DC comics, skirts the line between Urban Fantasy and Horror due to the existence of John Constantine himself. Despite Earth being depicted as an unrelenting hellhole and John's own questionable morals, the series consistently shows him getting the better of the Hell's forces. Just by the fact one man is standing up consistently for human free will, the world is slightly less dark.
The Dresden Files, possibly the ur-example of an urban fantasy series, goes a step further and has the White Council. While it's not without its flaws, the White Council balances against the darkness of the otherwise standard horror monsters. It's a world where good, evil, and gray co-exist without diluting any sense of the other. Naomi Clark's Undertow and Seth Skorowsky's Damoren take different views of this subject with the former having a 'hero' in name only while the latter is motivated by a strongly moral but vicious group of champions.
Part of the appeal is also that the books have the most well-developed and written-about setting in history: our world. An author can spend more time developing characters and their interactions because the reader can assume anything the book doesn't contradict is the same as on Earth in the present day. This isn't an excuse for lazy storytelling but works as resource management, allowing more attention to be placed on the protagonists.
I chose to write Esoterrorism with a very specific ethos in my mind. I loved fantasy, I loved monsters, and I loved glamorous unrealistic spy-shows. They seemed a natural fit to me and the two genres were a better fit than I expected. Thus, my original idea morphed into becoming the Red Room series. It was the kind of setting where the characters gained a sense of authenticity being people who'd grown up in our world, only to be shoved into not only a world of vampires and fairies but international intrigue.
Another thing which urban fantasy has going for it is inclusiveness. While many books don't take advantage of this simple fact, it's a truth that it's far easier to justify the diversity of humanity in the modern world than in a Medieval fantasy setting. One of my favorite moments of the Dresden Files was introducing the character of Sanya, a African Russian atheist who wields one of the holy swords of God. That's a memorable character. The Zora Banks series star a pair of Southerners, one of which is a black woman, which deals strongly with racial tensions in Chattanooga, TN as well as vampires.
Eventually, of course, the urban fantasy genre may become over-saturated and no one will be doing anything different with it. I disagree, however. Time will continue to march on and we'll always need to update the 'Real World' with our hopes and our dreams. Besides, if it does, we can always try something different. I'm already envisioning 1970s urban fantasy! Take down that evil Nixon with his vampire henchmen!