When world building, Gamemasters often put a lot of effort into the history of their milieu as well as the social and cultural elements and relationships of its denizens. How often though do we come up with myths, folklore and tall tales?
Now it seems an almost silly question to ask as for the most part, medieval fantasy rules and what is medieval fantasy based on but legend, myth and lore. Except...do we as GMs treat our world as such or do we treat them like 'real worlds', living, breathing, moving collections of people, places and events in a universe where such things as dragons, wizards and enchanted swords exist.
To put it another way, in a friend's D&D campaign universe Orcs are all descended from the first fallen hero who after becoming famous for a great and noble deed, became smitten with fame and fortune. Soon, consumed by avarice, the gods cursed him and all his followers to resemble pigs and henceforth their descendants are pig-faced Orcs. This isn't a legend. This happened in the campaign's history. This is an internal fact.
We tend to create prophecies and legends when we need them, as the lead in to adventures or to explain the origin of certain items but are we saying these are the absolutes truths or here say? Are we generating them on the fly or beforehand? Are they intended to be part of our campaigns or do they just seem like a good idea at the time?
My own D&D-But-Not world has a very detailed history and explanation for everything. Much of it is even true. Some of it, is specifically noted as unknown and therefore speculated upon. "There are many tales that tell why there are 60 ft. golems walking back and forth around the sitting Rae-Uhn..." for example. For another...
"Legend says this cavern is guarded by a three headed dragon!"
"Tis no dragon that has three heads fool. It's a hydra."
"A Hydra? This far north? Don't you know the legend of Sir BrakBrinn the Oaf? I heard it from my cousin's friend's older brother who spoke to the old woman in the woods when he was younger. It's a demon as sure as I live and breathe..."
That is a simple example of course. In truth there are large parts of my words history that are purposefully left with holes or incorrect information just waiting for players to stumble upon or show interest in them. Since I award experience points for revealing plot and world background secrets it behooves Players to investigate rumors and legends told by hermits and sages.
Even in Sci-Fi and Superhero games it's a good idea for the lore of a hero, villain, place or thing to be only partially correct. Stories get embellished and embellishments are misinterpreted. The key is, establish the story, let it sit for a while so the players assume and except it as true. Then reveal it to be a ways off the mark but with some stread of truth in it to explain how it was warped in the first place. Just something to think about.