When I edit an image that is meant to be in the fantasy genre there are a few things I do to it that I wouldn't normally do while retouching a general portrait.
I start by editing the same, the first things I look at at clearing up the skin, removing blemishes and making sure the skin tones are even. I brighten and sharpen the eyes, and whiten teeth if needed. Depending on the hair I might remove fly-aways. I might do some colour correction, straighten or crop the image if needed. These are standard steps when I retouch any photo.
From there I build upon my standard retouching to create a fantasy image. For things like wrinkles, moles, undereye circles I typically would only fade them in a bit in a general retouch, for fantasy depending on the person and image I will edit much heavier, perhaps even removing things I normally wouldn't. Rather than keeping the majority of texture in the skin, I will add smoothening. After this I use a dodge and burn layer to create some contrast between lights and darks, this starts creating a painterly look on the photo.
Occasionally I will composite in things that are not actually in the image, like wings, or butterflies, I might liquify the ears to look like elf ears or make any other major adjustments to the subject of the image at this point.
Unlike regular retouching where I want the colours to be true to life, fantasy retouching gives the creative freedom to colour grade the images. What colour tweaks I make to the image will all depend on the mood and atmosphere of the shoot. I might want the images to have cool blue tones or perhaps if the image is something a bit more passionate or fire related I would colour grade with some warmer tones.
Movies are a great example of colour grading they often use lighting and colour tone of the shot to subconsciously set the scene. Take Twilight for example, that movie is very very blue.
This over the top blue colour grading not only speaks to the name of the movie, creating that dusky twilight colour, but also seems to speak to the angsty brooding nature of the male character, Edward. The strong colour grading here also helps establish that this is a fantasy genre movie and not a still shot from a reality tv-show.
Once I have found the colour tones I like for the image I will start to experiment with other effects, I might add some blur to areas or a vignette. I will try a few different overlays that will either tweak colours, or light or add things like sparkle or texture to areas of the image.
The end result is never meant to look like reality, but to represent the fantastical, whimsical and feel more dreamy.