No aspect of the setting exists if the characters are not interacting with it.
So what do you think? How do you run it? Is your campaign setting realized and existing even without character interaction? Or do you only detail what the characters are interested in?
If you're asking only about D&D, I think there are some challenges in running a D&D setting in an improvisational or "just in time" mode. 4e comes the closes, but still has some limitations in this respect. Here is something I wrote around 10 years ago about that:There seems to be a misunderstanding that I run improvised settings, or settings that "serve" the players. I don't think this is true... I run settings that serve the characters and grant the players fun, interesting challenges! Usually what I'll do when the characters enter a new setting is that I'll create a list of "truths" about the place. I'll also ask the players for ideas of what might be there, or what they want to encounter ("I've always wanted to fight a beholder" or "we haven't encountered any magic item shops yet" for example). When the characters are exploring and investigating, I'll pull results from my list of truths, or create new truths based on ideas they have.
For example, if the characters are coming to a seaside port city, I might have truths including "ruled by a corrupt hedonistic baron" and "pirate merchants sell illicit goods" and "an abandoned island temple may house a pirate treasure hoard." As the characters talk to NPCs, investigate the city, and as the players ask me questions, I'll pull out stuff from the list. Whatever doesn't make it usually gets tied into the next setting.
In other systems, which have better support for this sort of play - I'm thinking especially of Burning Wheel and Torchbearer in my own case, and also to an extent MHRP/Cortex+ Heroic - doing "just in time" setting creation, where setting is established as needed to support the needs of play (typically either framing, or failure narration), works very well.In this respect 4e resembles a game like The Dying Earth. I've never read the Vance stories, but feel that I could run a game of Dying Earth from the rulebook. It gives me the "vibe" and "meta-setting", plus tips on how to set up situations/scenarios that will exploit that vibe to produce a fun session.
My feeling is that 4e was written with the intention to be GMed in this sort of way. I say this because (i) it fits with the game's emphasis on the encounter - combat or non-combat as the basic unit of play; (ii) it fits with the obvious effort to create that default atmosphere, with the gods, race backgrounds and so on in the PHB and the little sidebars in the Power books; (iii) when you look at the original MM (with most of the campaign info located in skill check results), plus think about how skill challenges should play out (with the GM having to make calls about NPC responses, and other elements of the gameworld, on the fly in response to unpredictable player actions), and even look at the whole emphasis on "situations" rather than "world exploration" as the focus of play, the game seems intended to support "just in time" creation of world details, using "points of light" and the default atmosphere as a framework for doing this in; (iv) it fits with the absence of a developed setting.
Unfortunately, though, the rulebooks don't do much to support GMing this sort of game. A contrast is provided by The Dying Earth rulebook, which does offer tools to help the GM with this sort of situation-based preparation and play.
For 4e, this is really provided by Worlds and Monsters. Good art, interesting stories, and (most importantly for a GM) good discussions of the way in which those stories have been designed to help make an interesting game. Big chunks of this book should have been incorporated into the 4e DMG, in place of (what are in my view) unnecessary or overlong parts of it like the tedious discussion of giving adventure locations personality and the random dungeon generation. If they had been, that would have gone some way - though not all the way - to helping GMs run games in the sort of fashion that the rulebooks seem to intend.
There are also one-shot-ish systems like Cthulhu Dark and Wuthering Heights which don't need any setting beyond a sense of "OK, we're in late Victorian London".
I read the rest of your post, but I think I still disagree with this claim. A setting doesn't need to be established, and certainly doesn't need to "exist" in the form of a GM's notes, for the players to be able to make choices and declare actions for their PCs. It's true that players need some sense of open possibilities, but I think this can flow from framing and associated expectations, without requiring the GM to have actually built out the "world" in which those possibilities might be realised.Unless it's a railroad by definition a world must consist of more than the party interacts with. Because otherwise there is never the possibility of options not taken and choices offered and turned down.