Perhaps around the same time it started to be used synonymously with "paranormal romance". This irks me from both direction, as plenty of urban fantasy and plenty or paranormal romance has nothing like werewolves or vampires in them. A great deal of science fiction romance, for example, ends up shelved under paranormal romance (when such categories are used instead), along with the usual urban fantasy novels.

When they realised how much money there was in it.

2004 in the US, 2008 over here?

I keep on clinging to the old definition, particularly when people ask me to recommend an urban fantasy. As I invariably start with John M Ford's The Last Hot Time, I think I confuse them.