I like a lot of the advice given so far, even the stuff that conflicts as a starting point because differences in approach are not always mutually exclusive. As a matter of fact it is often possible to find or create a good synthesis of differing objectives if you go about it the right way.
As far as to your question about how to begin, I've done it both ways. I've started by designing the entire world, and writing two or three full campaigns before I ever ran a single player through anything, and I've done it by writing a single adventure and letting the players discover things as they go along. That is you flesh out the world ad hoc, along with the players.
Depending upon how you execute these various methods either can be very successful, or kinda disastrous.
I'll return to this thread later because I'm going to be writing an essay on Real World Historical Elements in the development of a campaign and a background setting/milieu. However I have discovered a few things down through the years, and I've been playing D&D (as one example) almost from the time it was invented.
1. The world is not really for your benefit, it is for the benefit of the players. That is you write and create the world, but the players have to play in it, and the characters have to live in it and explore it. You will learn things by creating it, and you will enjoy other things in creating it, and it will be a lot of hard work at other times, but in the end, if it was all about you then you could and would design it for yourself. But it ain't for you, is it? Not really. So if you're really smart you write and design the world not for your benefit, and not for what interests you (alone), but for what will interest your players. Now I started out playing with Middle and High School buddies, most of whom I had grown up with, so I knew them well, and they knew me well, and we shared many of the same interests. So if you know your players, and what they are like, then you write not only adventures that will interest them, but campaigns, cultures, political and military systems, religious motifs and themes, mythological elements, historical eras and events that interest them (the players) as well. Now that won't be hard if you are familiar with your players and you share similar interests. But it is very much like writing a fiction book. You aren't writing it for yourself (that is, what you want is not your chief consideration if you want the book to sell), you are writing it for your reading audience. It is the reader to whom you target the book, and likewise it is the player for whom you design the world. (You could for instance include all kinds of really cool and flashy and extremely complicated, but ultimately useless elements, as far as the player is concerned. Great for you, maybe even extremely stimulating to you as a creator, but of no benefit to the player. So what was really accomplished? Not much. The purpose of the game and the setting is not to expose the brilliance of the designer, he should be so brilliant as a matter of fact that he disappears completely. The best artist is never noticed. Only the art. The best author is never heard. Only the story. The best creator is invisible. All that is seen is the handiwork. In that way the player is never distracted by the creator, and the design is never confused with the world. That is how a sense of reality is maintained, not by interjecting yourself into the world, but by disappearing from it so that the player can explore freely and without hindrance from you. The player forgets he is in a game, he only remembers he is the game.) Now of course you should include elements that are of interest to you, even so far as to promote elements you want to explore as well as hope that the players will want to explore. Since many of your players will probably have similar cultural, political, religious, histological, mythological, fictional, etc. interests as yourself it is quite probable and possible to design a world which easily accommodates both your interests (because your interests and the players will probably overlap in several respects). But remember this, you aren't creating the world as an exercise in self-indulgence. You are designing a world which, if it is successful, must stimulate the on-going interests of the players. (If it didn't stimulate your players, as opposed to just any old players, then you could just buy any commercial setting and run that. Any world would do. But you're creating the world with certain types of other people in mind, not just yourself in mind.) Imagine God, for instance, creating a world which interested only him, or an author writing a book with no other audience in mind than himself. How successful would such ventures really be? You have to have in mind what the players want, what their interests are, what they would like to explore, what cultures they are in sympathy with, what historical eras fascinate them, and so forth and so on. So either use what you know of the characters and natures and interests of your players, or just sit down with them and ask them what they want? What would interest them? Why? how? When? The use that information to assist in developing your milieu. But if you don't design with the player in mind then you might as well be writing a book for yourself. And if you do don't be surprised if the number of copies you sell is somewhat limited by that failure of design.
2. I think Jack gave some good advice about general thematic background elements. Background elements, even when they are so subtle as to be almost unnoticeable at first are very good "anchors," so that your setting will not be adrift in a Sargasso Sea of currentless stagnation. With themes, of various kinds, general, structural, plot-line, historical, religious, fantastic, etc. you have a course you can chart, you have wind in your sails, you have a star to steer by. A milieu without a thematic compass is subject to every gale that blows, has no port of destination, and no rudder by which to steer her course. So insert themes and given those themes methods by which the player can attach himself, so that he can take advantage of the currents those themes help navigate. As you plot the themes of your world think to yourself, "how will my players plot their own way through the themes of this world?" But as with writing and designing the world for your players, see what themes the players find of greatest interest. Then take the themes that interest your players, and the themes you want to develop and explore in the world you are creating, and see if you cannot develop interesting, and even stimulating syntheses of thematic elements that will make the world interesting for your to design, and equally interesting for them to explore and adventure through.
Anyways good luck and Godspeed.
My overarching advice is this, know your players and their interests, know the genre and genre interests generally speaking, and know what interests and fascinates you and see what kind of accommodations you can reach on all points to make your milieu as interesting as possible for all parties concerned.
But if you don't give the players what they want, and you don't stimulate their interests, then it doesn't matter how ingenious you think your creation is, it just won't sell. And if it won't sell, then it's not a world anyone else will want to visit.
And you want the very opposite of that.
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