Mostly real, I suppose. I don't get too hung up on things, but I try to minimize the blatant supernatural, to a degree. So there are dragons and magic and the like, but generally it isn't very populous nor is it visible in public. Where it is, it tends to be isolated. I don't like magic item shops, kings and rulers that don't fear death thanks to resurrection magic, and generic guards or soldiers that have to be over 2-4th level to reasonably handle any threats they might see on a semi-regular basis. That's where my 'realism' kicks in, I suppose, where generally speaking, circumstances allow just that to happen reasonably.
So populated areas and regularly traveled roads usually don't have anything worse than bandits (or something with a similar challenge rating) wandering them, there's not enough buyers out there for magic items that aren't specifically commisioned, and priests of 9th level or above are usually miracle workers and saints, far too busy serving in the name of their god to bother with secular politics (pope-like figure equivalents will generally be low-level clerics, high-level aristocrats/experts). High-level characters and monsters exist, of course, but they usually won't just be bumped into randomly.
Of course, too realistic is just boring. But that's where the PC's come into play. They're alive for the sudden magic event that pops into the lime-light. Or go to the places where demons run rampant. Or run across the gods chosen who can bring back even the dead. Or whatever.
And for things that would reasonably exist in our world, that aren't at all magical in D&D, yet have no real world equivalents, I usually eliminate them as well. That mainly just covers many double-weapons for me.