Possibility is the most basic feature of reality--it's true.
Now some philosophers held that whatever is possible is actual; in other words, everything is necessary. I.e., if I can imagine or conceive something that is not the case, then it must be that my conception is contradictory--impossible logically and metaphysically. For example, it seems that I could be drinking a beer at this moment; but I'm not; so it's not possible that I'm drinking a beer right now--my "possibility" is mere fancy. Whatever is actual must be the case. But this is entirely unfounded.
Other philosophers have held that possibles are real, regardless of whether they are actual or not. For example, I can imagine that I'm drinking a beer at this very moment; thus there really is a possible world, so to speak, in which I'm drinking a beer. The possibility is real and not a mere fiction; it's just not part of the actual world.
Possibility is the most basic feature of reality. Why do I say this? Before something can be actual, it must first be possible. Say I believe in God: for God to be actual, He must be possible; if He were not possible, then He could not be actual. Or say I believe in a thingawhat. Whatever the term "thingawhat" means, it ought to symbolize something that doesn't constitute a contradiction. Say I believe in a four sided triangle; I then believe in an impossible notion--absolutely impossible to realize due to the very nature of the terms involved. Possibility is prior to actuality, in the sense that actuality cannot be had without the possible.
And this is the definite meaning of the phrase "essence precedes existence" (although we most often hear the existentialist notion "existence precedes essence"). That essence precedes existence means that possibility is more basic a feature than is actuality.
Then what is there to distinguish possibility from mere fiction? Simple. Fiction is that which represents a contradiction in terms--though that contradiction be not necessarily evident to us. Possibility, on the other hand, is consistent logically and metaphysically, though it lacks sufficient reason for existing actually.