Looked it up last week after coming upon this advertisement from Calabash Press:
Now available as an Ash-Tree Press eBook, FLOKI'S BLADE AND OTHER DREAM FICTIONS by Edward Lucas White. Twenty-three stories: supernatural, ghostly, weird, and contes cruels, plus afterwords and prefaces from the author telling how many of his stories were conceived in dreams. Not to be missed. www.ash-tree.bc.ca/eBooks.htm
Best definition/explanation I've found, from https://groups.google.com/forum/#!topic/alt.books.ghost-fiction/VgasuFi-9f4
Literally it translates to 'cruel tale'; the sort of story that isn't necessarily (or even often) supernatural, but which usually contains some sort of horror (violence, torture, deprivation, mental persecution) and ends in a cruel twist of fate. In his entry on 'The Continental Tradition' in THE
PENGUIN ENCYCLOPAEDIA OF HORROR AND THE SUPERNATURAL, Michael Dirda mentions as a 'conte cruel' Villiers de L'Isle-Adam's 'The Torture by Hope', 'in which a condemned prisoner is permitted to escape his cell, but only so that he may be recaptured at the last moment'. Another example is Maupassant's 'La Morte', in which a man visiting the cemetery where his mistress is buried sees the ghosts of the dead come out of their tombs and re-write the pious lies on their gravestones, putting the truth instead. The man hurries to his mistress's grave, and sees written on her tombstone 'Going out one evening in the rain to deceive her lover, she caught cold and died.'
THE ENCYCLOPEDIA OF FANTASY defines a conte cruel as 'a type of story named for Villiers de L'Isle-Adam's classic collection CONTES CRUELS (1883)'. The author acknowledged the influence of Poe, who was appreciated in France long before he was embraced by Americans. 'Some critics use the label to refer only to non-supernatural stories, especially those which have nasty climactic twists, but Villiers' collection mixed fantasies and non-fantasies, and the kinds of fantasy story that draw uniquely sharp
attention to the relentless cruelties of Fate may be conveniently discussed under this rubric.'
Many writers associated with the Decadent movement of the late nineteenth century produced contes cruel; Ambrose Bierce is the writer who really introduced the concept (after Poe) into America, while W. C. Morrow's 1897 collection THE APE, THE IDIOT AND OTHER PEOPLE is called a 'significant exemplary collection' of such tales.