With the latter - a stunning and wonderful piece of genre, in the sense of genre as scenes of normal life (its correct use in art history).
Sorry, but this caught my eye. You call the art-history usage the "correct" one, but it strikes me as a rather idiosyncratic one. "Genre" literally just means "kind" or "type," from the same Latin root as "gender" and "genus." I can easily see how it came to mean "a class or category of artistic endeavor," but it's much harder to see how it came to mean "paintings of scenes of everyday life." It's probably the same kind of synecdoche/shorthand that leads to our modern use of "genre" as shorthand for "science fiction/fantasy/horror" -- a term that originally just meant "category" coming to be applied to a specific category that's seen as contrasting with the default/mainstream type of work. SF/F is called genre because it's seen as an exception to ordinary, mainstream fiction (even though that consists of various genres of its own), so I'm guessing that specific field of painting came to be called "genre" because it was distinct from whatever was considered the accepted norm in painting.
Ah, here we go. Wikipedia says that type of everyday-life painting is also called petit genre ("small sort"), as distinct from grand genre ("large sort"), portraying important historical events. So dropping the petit and just calling it genre must have arisen as a shorthand which was somewhat careless about the literal meaning of the term.
Chris, I am an art historian, so it's good you bring this up

I was not saying that that art historical definition is more correct than other uses of the word 'genre' outwith art history - it is just the meaning an art historian understands most commonly will refer to when you refer to the 'genre' - scenes of normal life, as in the work of you would be familiar by Vermeer (although not his portraiture). I should maybe have said "most correct" or "most specific" - but I myself was speaking in shorthand.
Anyway, the idea of petit genre is connected to the traditional canons of art, which downgraded the petits genres - what we call genre, landscape and portraiture painting - in favour of grand historical subject matter - historical, classical and religious iconography - which were the preserve of high-end patronage and appreciation. (There is also the issue of petit media verus high media) However, the old argument goes, that genre and landscape became popular in Protestant countries where older popular forms died out - but these subjects were especially popular with and available to bourgeois audiences, partly as the paintings and tapestries of these were more easier to purchase than classical and secular subject and appealed to audiences and artists who disliked religious imagery. So they were 'lesser' genre. It's not entirely true to why genre itself became popular - it occured all across Europe, and it is a much more complex development which modern art and cultural historians are unravelling, to do with media, gender, ephemerality, class, and thousands of other things we lovingly write upon and argue about. But the term genre in reference to scenes of everyday life is the most specific within art historical literature.
It's not inaccurate or careless anymore - and you are dealing with a discipline that did not originate in English either! Much of our development until the twentieth century was French, Italian and German. Anyway, genre in this meaning is something we teach to every first year student. It's explained in every basic text book (from the old school surveys like Gombrich's The Story of Art or a more international survey like Hugh Honour's & John Fleming's A World History of Art - read them!). It's the word we use in academic literature not as short-hand but as a specific term.
And as a teacher and academic, I think my blood curdled at the use of wiki! Use something on Googlebooks - indeed use and explore a text on genre, like Wayne Franits's book on dutch genre in the 17th century or Elizabeth Jones's book on American genre art. Or read an introduction, eg. the Honour and Fleming one. don't use wiki!
