The term comes from film, right? Specifically about sound that is heard by both the characters and the audience, rather than just the audience (like a score, or narration, etc.).
Right, it's mostly used for sound, but it can be applied to other aspects of film, too (I think it's most useful for sound). I think the defintion you're using here is the upshot of things, though I've generally started earlier in the process -- if something is diegetic, it has to exist within the fictional world of the film. Generally, the score is considered nondiegetic sound while music played on a radio is diegetic sound. Narration can be either, depending on how it's portrayed -- contemporaneous first person narration, such as a character narrating her own thoughts, is diegetic, but third person narration is probably not.
It was adopted as an RPG term, by Cavegirl on her blog. The term doesn’t perfectly fit RPGs, and some of the other examples offered in the blog aren’t the best, but Cavegirl does a decent job of explaining her use.
I'll have to check out her blog.
But here’s the thing… as originally used, it is describing something being part of the world portrayed in the film, that normally would not be part of that world. It is the exception. Most film scores and/or soundtracks are not diegetic. They’re separate of, if complimentary to, the story being told. Having music that is actually diegetic is the exception rather than the rule.
Soundtrack and score are the classic examples of nondiegetic sound, though this isn't categorically the case -- we've talked about music on radios (I think this really became a thing with the American New Wave, and Tarantino really runs with it in the 90s), and that's diegetic sound.
This is a digression, but you bring up the torture scene in
Reservoir Dogs later in this post. There're probably conversations to be had about how to read the way Tarantino's sound mixing of "Stuck in the Middle with You" changes and how we're supposed to think about that -- it's clearly diegetic at the start of the scene, but when it comes up in the mix later in the sequence (0:46 or so
in this clip), I think things get a little muddy. I think it's a misreading of the film to say that the music actually becomes louder in the warehouse, but I do think its increased volume could be read as reflecting Mr Orange's fear and heightened attention to Mr Blonde. Overall, I'm inclined to read the switch in the mix during the dance sequence as a switch to nondiegetic sound -- the music's representational of something in the fictional world but no longer the same as it is in the fictional world -- but I could be convinced otherwise.
As such, it’s not really meant to be used as a term for everything that’s happening in the fiction of the film… the actions of the characters and the events of the film, the story… they aren’t diegetic in the same way as music would be. There’s no need to point out that they are part of the film… they are evidently so.
I think they are diegetic in the same way -- they take place in the diegesis. But I agree that they're evidently so and that it's not the most interesting thing in the world to talk about. I was trying to think of examples of nondiegetic elements in films that aren't (a) the score or soundtrack or (b) title cards or credits, and there aren't a ton of them that come to mind right away. The two I thought of that seemed relatively memorable were
Mia Wallace's square in
Pulp Fiction and
the travel map sequences in the Indiana Jones films.
What needs a term is something that normally would not be part of the story, but in this case is. That’s a soundtrack or score. The torture scene in Reservoir Dogs is a famous example. The song being part of what’s happening in the scene is an important element for that scene. It’s diegetic for that reason.
I agree that the song is important (I would argue that all songs in films should be important, else the filmmakers have made grave mistakes, but we can't always have what we like and
sometimes choices are kind of uninteresting, though I expect the readers of
Horse and Hound might disagree with me), but I disagree that importance has anything to do with whether an element's diegetic or not. The background music at 2:05
of this clip from Groundhog Day is diegetic sound, but it's not important. It's just meant to evoke setting.