Faction is a portmanteau word of obvious composition which originated c. 1970. It denotes fiction which is based on and combined
with fact.
Notable examples are Truman Capote’s In Cold Blood (1966), Norman Mailer’s Armies of the Night (1968), and Alex Haley’s Roots.
It is a vague term at the best of times and its usefulness has been questioned. It might easily apply, for instance, to historical novels which combine a great deal of period facts with fictional treatment, or to novels which incorporate actual living personalities (e.g. the President of the USA, the British Prime Minister, or the General Secretary of the United Nations) in a narrative about recent events which pertain to historical fact. Faction has proved to be quite a controversial matter, particularly in connection with television.