The Purposes of a Game World
Games entertain by several means: gameplay, novelty, social interaction (if it is a multiplayer game), and so on. In a game such as chess, almost all the entertainment value is in the gameplay; few people think of it as a game about medieval warfare. In an adventure game such as Escape from Monkey Island, the world is essential to the fantasy. Without the world, Escape from Monkey Island would not exist, and if it had a different world, it would be a different game. One of the purposes of a game world is simply to entertain in its own right: to offer the player a place to explore and an environment to interact with.
As a general rule, the more that a player understands a game's core mechanics, the less the game world matters. Mastering the core mechanics requires a kind of abstract thought, and fantasy can be a distraction. Serious chess players don't think of the pieces as representing actual kings and queens and knights. When players become highly skilled at a game such as Counter-Strike, they no longer think that they're pretending to be soldiers or terrorists; they think only about hiding, moving, shooting, ambushing, obtaining ammunition, and so on. However, this kind of abstract play, ignoring a game's world, usually occurs only among experienced players. To someone who's playing a game for the first time, the world is vital to creating and sustaining her interest.
The other purpose of a game's world is to sell the game in the first place. It's not the game's mechanics that make a customer pick up a box in a store but the fantasy it offers: who she'll be, where she'll be, and what she'll be doing there if she plays that game.