The identifying traits of fantasy are the inclusion of fantastic elements in a self-coherent (internally consistent) setting, where inspiration from mythology and folklore remains a consistent theme. Within such a structure, any location of the fantastical element is possible: it may be hidden in, or leak into the apparently real world setting, it may draw the characters into a world with such elements, or it may occur entirely in a fantasy world setting, where such elements are part of the world. Essentially, fantasy follows rules of its own making, allowing magic and other fantastic devices to be used and still be internally cohesive.
