0: More aggressively "normal" than actual people's lives. This is the zone of things like the weird obsession with enforcing racism, sexism, religious oppression, and other IRL stuff that, yes, it really did exist but is really not fun and unnecessary in a fantasy setting.
1: Actually like most ordinary lives, the "quiet desperation" angle. Very few people want to play at this level mostly because very little of consequence happens to the vast majority of people here.
2-3: Special extensions beyond ordinary drudgery stuff. The people who live in a border town that sees a lot of comings and goings, or who work in a noble's mansion and thus hear all sorts of scandalous things. That kind of stuff--beyond mundane, but only just.
4-5: Actually fantastical, but at a distance removed. You know the local priest can do some magical stuff, your great-grandmother left the family that "cookbook" and her husband's (now dusty and ill-maintained) sword she claimed was magical. That kind of thing.
6-7: The fantastical is blended into the everyday. This means there is still an everyday to blend into, but it's hard to sharply separate the everyday stuff from the fantastical stuff. On the lower end, this resembles 2-3 but with supernatural things in addition to merely mundane-but-outlier things. On the high end, it's the home of many standard YA fantasy novels (e.g. the Old Kingdom books by Garth Nix), or Eberron.
8-9: The fantastical has largely supplanted the everyday. "Weird" things are a regular occurrence, magic is almost everywhere. Harry Potter is probably on the low end of this, while arguably Lovecraftian horror tends toward the high end, where reality itself is a thin fictional coat of paint over the madness-inducing truth of reality.
10: There is only the fantastical, and it strains hard against the boundaries of what is even remotely conceivable, let alone plausible.
11: You have gone beyond the impossible and made even "fantastical" inadequate to describe the kind of experiences or events that occur. Congratulations for breaking the system.