Wikipedia doesn’t always get things right but its explanation of psychological fiction can hardly be bettered.
“In literature, psychological fiction is a narrative genre that emphasizes interior characterization and motivation to explore the spiritual, emotional, and mental lives of the characters. The mode of narration examines the reasons for the behaviors of the character, which propel the plot and explain the story.”
There are some faces that immediately intrigue, like the photograph above, and “what’s going on” tends to mean “inside his/her head” rather than “round the corner” or “in the kitchen”. You can experience this when you visit the BP Portrait Award exhibition. Many paintings you merely admire, but one or two arrest you, perhaps disturbingly, and of course no answer is offered against the painting for “What’s going on?” It’s online, so I invite you to see what I mean and I deliberately haven’t chosen one for you.
In a novel, it may be an odd behaviour rather than the look on a character’s face. In one of my Curious Men stories, I have a man organising tractor components onto the embossed flowers of a banquet cloth on the lawn. Mending a tractor may be commonplace, but what kind of man, and what thought processes have led him to this situation?
Psychological fiction can be found in different genres. I have written crime short stories, satire, historical and contemporary fiction, and I’d class all as psychological fiction because they are character-driven stories, the plot only emerging as characters develop and create situations. And as in real life, there is humour, sometimes, as well as drama. TV offerings appear to assume that murders are all that counts.