In 2001, the Mexican Secretary of Tourism (SECTUR) created an initiative called "Pueblo Mágico/Magical Town." This program seeks to highlight towns around the country that offer a unique and "magical experience – by reason of their natural beauty, cultural richness, traditions, folklore, historical relevance, cuisine, arts & crafts, and hospitality."
You can find SECTUR's "Magical Town" definition here.
A town that through time and before modernity, was conserved, valued and defended for its historical, cultural and natural heritage; and manifests in it various expressions through its tangible and intangible heritage. A "Magical Town" is a locality that has unique, symbolic attributes, authentic stories, transcendent facts, daily life, which means a great opportunity for tourism, taking into account the motivations and needs of travelers.