The art of fantasy storytelling is in its main points just the art of storytelling, where characterization and plot and style are the elements of a good tale. But what makes fantasy fantasy instead of some other sort of storytelling is the fantastic elements, and in the art of world-building one can (but need not, necessarily) go hog-wild.
Normally, one doesn’t. Most fantasy worlds start with some historical world as a canvas (or the present-day world) and add some fantasy elements in a controlled, moderate way to differentiate it from the historical reality. One can easily recognize the template of Medieval Europe in Martin’s Song of Ice and Fire, for example, even though Europe in the Middle Ages didn’t have dragons, icy Others, or weirdly elongated seasons.
In some, maybe most, fantasy world-building, this is the format: the strange and fantastic is subtle. But here are some examples of possible fantasy worlds where the imagination can run amok. These are extreme sorts of fantasy worlds, and telling a good story in the context of them would be a real challenge for the writer.
Humanity is enslaved/domesticated/ruled by something non-human. Gods walk the Earth and rule everything and human beings are their slavish creations. The world is controlled overtly by demons who enslave all of humanity, choose victims for torture and other nasty fun, and cook and eat human beings from time to time (preferably boiling them alive or, even better, roasting them slowly alive on a spit). A race of quasi-humans, superior to humanity in culture, intelligence, and magic, longer-lived, etc. rules and humanity endures in its shadow; the quasi-humans may be benign or malevolent or something in between. Super-beings have arisen (perhaps powerful sorcerers who have made themselves immortal) and live among humans demanding service, dominating them completely.
Stories that can arise from a framework like this include struggles by human resistance against the non-human domination, conflict between factions of the non-humans that sweep humans up in them on one side or another, or small-scale personal dramas that occur with the state of humanity as a backdrop. A twist would be to portray the non-human dominators as the good, sympathetic side, and human rebels as opportunistic, selfish thugs or misguided idealists.
The world is one of many worlds, accessible by magic and interacting routinely. Connected worlds are a staple of fantasy, but usually such worlds interact only rarely and with difficulty. What if the connection among multiple worlds was routine and people and other beings passed between them all the time? This would result in a wildly different society than any that has historically existed.
For example, what if our own world was linked by magical doorways that could open randomly almost anywhere — in a physical doorway, or the entrance to a cave, or on a bridge — leading to worlds inhabited by quasi-humans, or with primitive technology but advanced and powerful magic, or with advanced technology compared to ours, or with advanced technology AND magic, and there was no way to control these doorways but people were constantly moving from one world to another? Or worse still, what if the same thing was happening but with an unlimited variety of worlds, randomly selected? Maintaining any kind of stability or centralized government would be very difficult, and human adaptation to that insecurity — the possibility of being instantly transported elsewhere or of something materializing into one’s life from another place beyond comprehension.
If this began happening suddenly the result would likely be apocalyptic and humanity would be dealing with the breakdown of civilization, mass starvation, chaos. It would certainly create a lot of possibilities for plot lines, but one would have to be careful to keep the story comprehensible.
There is no physical world as such; everything is the creation of the will, with powerful god-like wills creating islands of reality and lesser wills modifying it locally. I actually began writing a story along these lines once, in which powerful beings — local gods — created enclaves of territory where they set the rules of physics as well as those of society, and each of these enclaves were surrounded by a fog of indeterminacy. A person could escape from an enclave into the fog and try to creates his or her own domain, but this was seldom successful as few had the requisite strength of will.
This is a kind of anything-goes fantasy world that could be host to story lines involving rebellion against an enclave-maker, attempts at fog-settling, or maybe the emergence of a person whose strength of will was so strong that he will bring stability to the world after all — in one direction or another — perhaps even two such persons with conflicting visions.
The world is an illusion created by people or creatures who have imprisoned us within it and are using us in some way. Perhaps they feed off human emotion, or are conducting a great experiment. Nothing is what it seems, and behind the illusion is a reality that can be penetrated only with difficulty. Stories in such a milieu could involve escape from the illusion, rebellion against its creators and masters, or characters who rise to join them and find out that a greater conflict in reality renders all the turmoil within the illusion irrelevant and insignificant.
There is a reason why one seldom sees fantasy worlds that are quite this bizarre. It’s hard to write a story in such a setting that will be believable and that readers can relate to. The first one is actually not as difficult as the others and something along those lines has been done before, but most fantasy makes more modest amendments to the reality we all experience.
Still, it would be interesting to see fiction that goes all-out in this way done successfully. I may give it a try one of these days.