When it comes to the Bible, there are two terms that are thrown around by non-believers, particularly sceptical atheists. Those two terms are: myth and legend. The unlearned will typically claim that the Bible is pure myth, whilst the more educated will claim that certain portions are myth (particularly Genesis) whilst the portions that purport to be historical are 'legendary'. However, how are these terms actually defined in critical Biblical scholarship? Whilst the term 'legend' is fairly well-understood, albeit perhaps not formally defined, the term 'myth' does not yet have a generally agreed upon definition. Now, in Biblical scholarship, the term 'legend', more particularly, 'legendary embellishment', usually refers to fictitious material that was added onto an account to give it more "flair". When critical scholars of a sceptical bent claim that certain events in the New Testament are 'legendary', what they mean is that that particular portion of the general account never occurred and was added in. These legendary embellishments can range from peripheral details of an account, to larger segments of purely fictitious narrative.
For instance, the first chief biography of George Washington contains a false account of his chopping down of a cherry tree. This is an example of the former category. Whereas an example of the latter category would be Philostratus' biography of Apollonius of Tyana. This account is almost entirely full of false reporting. Another term for this sort of account is 'hagiography', which was originally a term principally used to refer to Medieval accounts of past saints and is more widely being used to refer to accounts that are overly fanciful, inaccurate, etc.. More recently, historians have begun using the term 'hagiography' to refer to minor legendary embellishments, and even non-literal historical reporting, such as accounts that use exaggerated language. For example, many accounts of battles during the Crusades claim millions of casualties and reports of the siege of Jerusalem claimed that the streets ran red with blood that reached the bridle and reins of knights on horseback. No historian believes that this was literally the case, as it is recognised as clear exaggeration meant to highlight how brutal the battles were.
However, whilst there is generally broad agreement to the definition of the term 'legend' (as well as derivative terms, such as 'legendary' and the related term 'hagiography'), there is little agreement over what constitutes 'myth'. Rather than mull over various definitions, it might be more prudent and useful to rather look at some examples universally considered to be 'mythology'. The best examples of 'myth' are the epics, poems, and sagas of ancient civilisations, such as those from Greco-Roman and Ancient Near Eastern pagan religions. Works such as Enuma Elish, The Iliad, The Odyssey, or The Aeneid. However, I contend that these works are not too dissimilar to example of modern fiction, specifically fantasy and sci-fi literature with deeply fleshed out 'worlds'. Indeed, it is not uncommon to hear individuals refer to works of fiction with a shared continuity and universe as belonging to a 'mythos'. Such works often seek to expound on deep social, cultural, political, religious, theological, and philosophical questions. One point to make, however, is that a work need not have supernatural elements to be considered 'myth'. Nor does the inclusion of supernatural elements automatically make something 'myth'. To insist on such a criteria would simply be question begging.
There is a marked difference between myth and mere legend. It is hard to see where the difference lies, but I don't believe this prevents us from recognising the two. To say that we are incapable of identifying examples of things because the differences between them aren't easily defined is to commit the continuum fallacy, such as those employed in the Sorites paradoxes. A good example of this kind of fallacy is described by Richard Dawkins in his book The Greatest Show on Earth. Any genetic mutant will be sufficiently similar to its parents as to be virtually indistinguishable from its parent species. Yet we can nevertheless identify members of different species and genuses, and so forth. I don't know if this sheds any insight on how myths are created, however. Moreover, there is still room for debate; is poetry necessarily 'myth'? What of ancient genres such as wisdom and apocalyptic literature? That's not easy to tell. Hopefully, however, this does show that there is a difference between myth and legend.