How often though do we come up with myths, folklore and tall tales?
Now it seems an almost a silly question to ask as for the most part Medieval Fantasy rules and settings are based on legends, mythology, and similar 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 things such 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, usually as the lead-in to adventures or to explain the origin of certain items but are we saying these are the absolute truths of how they came about or are they hearsay? 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 told about the 60 ft. golems walking back and forth around the city-state of 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..."
Those are simple examples of course. In truth there are large parts of my world's history that are purposefully left with holes or incorrect information swirling about them just waiting for PCs to stumble upon or show interest in them and find the true truth. 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 shred of the correct story in it to explain how it was warped in the first place.
Just something to think about.