What exactly is considered folklore? Wikipedia defines folklore as "the body of expressive culture, including tales, music, dance, legends, oral history, proverbs, jokes, popular beliefs, customs, and so forth within a particular population comprising the traditions (including oral traditions) of that culture, subculture, or group." The study of folklore is called "folkloristics."
How is folklore valuable to a genealogist? In addition to the content of religious or mythical elements, folklore gives valuable information on the routine traditions of everyday life. Folklore can also describe the culture and behavior of a locality, region, or ethnic group at large. Folklore encompassed many different subjects from war to healing, and is expressed in many different mediums.
Folklore includes the rendering of tales of ghosts. These can be valuable in the sense that real or not, ghost stories almost universally follow any type of tragic death or event. So if you have had those types of events in your family, they can be a jumping off point in a search for truth and perhaps provide a minute detail when investigated will lead to the accurate details of the event.
A grandfather of mine is the subject of local folklore and ghost stories after a family tragedy in which he and some other family members perished. Now it is purported that the scene of his death is haunted by ghosts. The ghost stories of the incident give a surprisingly accurate rendition of the event, with minor variations and added drama here and there.
This illustrates the point of not overlooking these stories in your genealogical pursuits. These stories of local legend can be found in libraries and bookstores and even neighborhood tourist shops. The stories can give you additional clues to use in your research. Even if your ancestors are not the subject of a story, local folklore can present you with a better picture of the local way of life for your ancestor.