What makes a book fiction/non-fiction?

I have been reading book for a long time, and the most exciting thing for me is to be visiting a new place and seeing books lying around on a table or a bookshelf. If I see a familiar title it feels like reacquainting myself with a friend, and if it is an unfamiliar title then it is like being introduced to a person for the first time.

Something I don't quite understand about books is just what makes it a fiction or non-fiction book? Just look at some of the great science fiction writing, and how many of the things described seemed to be fantastic at the time of writing but turn out to be pretty close to the mark. Then take a look at some of the textbooks, manuals and documents that were written about medicine, science, technology and other topics that we would classify as non-fiction as see how far off the mark they are compared to our current knowledge.

Does this mean that fiction and non-fiction is relative to our current knowledge? Does this also mean that 'facts' may have a shelf-life? Does this mean that you shouldn't believe everything that you read, and that you should read things that you don't believe in because at some point it will probably become 'fact'?