A novel is an extended version of a narrative, which is usually fictional in nature. This form of literature started out as short works about love, and continued to be recognised by this characteristic till the eighteenth century. It graduated to a newer style when it used characteristics from other styles and developed into one of the foremost literary genres.
A novel can be called a classic when there is a significant time period between its publishing and the current age we are in. In other words, it has to be old, as well as critically renowned as a good novel. Then, it can be called a classic.
Examples of classic novels are Oliver Twist, Les Miserables, and A Tale of two Cities etc.
I believe a classic is something that really teaches a lesson. Like in Pinocchio it teaches people that lying is never good.
The Western novel as we know it today is generally believed to have come into existence in the mid-17th century with the works of Daniel Defoe ("Robinson Crusoe") and Samuel Richardson.
The novel came about with the rise of the middle class, and Defoe and Richardson were the first to express the concerns and interests of that social group in prose, versus poetry.
The sentimental and aristocratic refinements of earlier epic romances and poems gave way to the themes and straight-forward dialect of the newly literate class of shopkeepers, apprentices, servants, and soldiers.
In "Pamela" and "Clarissa", Richardson presented a morality tale and an insight into the sensibilities of women -- a growing segment of the reading population. Characters' emotions and states of mind were analyzed, a new concept.
In "Tom Jones", Henry Fielding created a lasting image of a romantic protagonist who rises from poverty to wealth by his wits and with the help of women of differing levels of virtue. This became known as the "sentimental hero."
Tobias Smollet and Laurence Sterne enlarged upon the Fielding hero and the picaresque genre of following a hero's exploits as he encounters many types of people, from whom he shapes his moral compass.
Sterne's "Tristam Shandy" took the radical course of a nonlinear plot (common in modern literature), with interruptions to digress to the past. Dickens and Thackery enlarged upon these themes and methods in the 19th century.