I think Tolkien used that word when he intended the history of Middle-earth to be a tale told by Rumil of Tirion to Edwin (I can't remember his other names), a traveler through space and time. Faerie is also probably a Mannish name for any kind of Utopia, and Valinor certainly fits that description.
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But Melkor also was there, and he came to the house of Fëanor, and there he slew Finwë King of the Noldor before his doors, and spilled the first blood in the Blessed Realm; for Finwë alone had not fled from the horror of the Dark.
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