I'm going a bit wider than the OP may have intended but this is where the question is taking me.
There's a lot of factor's that can influence technological development in a fantasy game world. A somewhat unstructured case study comparing Eberron to Greyhawk follows. I've chosen the two extremes within DnD canon to best illustrate points.
I agree the amount of magic in a campaign will be a major influence on the development of technology. In Eberron magic is technology; it's just a matter of semantics really. In Greyhawk there's not that much magic available to the masses; magic is a rare and mysterious thing.
The amount of magic available has a direct influence on technological development. More magic = more opportunity to develop technology. Of course more magic also = less need to develop "technology" (in the real world sense) but magic-tech will do just as well for me for purposes of this discussion. Magic can be used to overcome many of the problems of developing technology. Power source, R&D, scientific investigation (need to see the micro structure of this steel girder? Hang on, I'll put on my eyes of minute seeing.)
In Eberron you get a well developed pseudo-technology. Mass transport, telecommunications. Heck I don't see why wide screen crystal balls can't be developed to transmit news and entertainment to the masses. I'm sure it's possible within the rules and the flavour of the game. There also seems to be an assumption about better production techniques for more basic things, like buildings. (Sky scrapers aren't possible with medieval tech.) And rail lines require an enormous amount of steel track that must all be made to a single standard (and laid to single gauge. Is the lightning rail mono- or dual- rail?) All this is possible in Eberron because magic has been harnessed for the use with modern ideas like mass production.
In Greyhawk magic is mysterious and controlled by elites who don't want to share what they have for fear of diluting the power of their knowledge. This reduces the chances for interesting synergies to develop. And many essential modern ideas are just... not there.
It's been mentioned that a society without magic will have more need to develop technology. I agree. But how far this technology can be developed will depend on other factors.
For instance: there's the effects of sociological development.
Eberron has Houses that make their money by selling the benefits of technology, just like modern companies. It is in their interest to make technology available to all. Or at least the benefits of technology. Obviously they wish to guard their production techniques but they actively want to sell their products. And they have markets that can afford what they have to sell.
Greyhawk has secretive guilds that jealously guard what they know. And not just wizard's guilds but non-magical guilds too. They don't wish to share the knowledge they have for fear of losing power and influence. Hell, maintaining a monoply of a trade/industry is why guilds form. Now a big enough monopoly can use their power to make advancements in their industry, but only if they feel the need to do so.
Why, you may ask, don't the guilds in Greyhawk realise what they're sitting on? Why don't they make the leap to using their skills to make a profit in the same way as Eberron Houses do? Why don't they use their power to mass produce and mass market? Answer: because they don't have concepts like mass production and mass marketing. Or even the belief that an economy can expand independantly of the supply of precious metals. (fortunately not a problem in your average DnD game.) They are limited in what they can achieve by what they believe. And what they believe is medieval. They need a major intellectual revolution. They need to move from a medieval mind set to a modern one. Of course this is possible, it just hasn't happened yet. Also it happens slowly when it does happen.
Certainly there is technology available to the Greyhawkers. Water wheels and windmills are great, and relatively cheap sources of power. But they are very limited in terms of output, not to mention unreliable in terms of constant output. By contrast Eberron has magic as a power source and magic will give a much greater and more constant output. Much better for mass production.
There's all sorts of other factors as well. As I said above: Eberron has large markets. Greyhawk does not. Houses are trans-national entities that can benefit from a World War by selling to all sides. Their counterparts in Greyhawk cannot trade with a nation their homeland is at war with. Not without serious risk of beheading anyway.
The use of standardised parts is a great innovation, without which much modern industry would be impossible. Standardised parts can be developed in a medieval setting. The Venetians used them in ship construction during the middle ages. But someone still has to have the idea and the idea has to be implemented which requires some sort of strong, long lasting, centralised adminstration. Which Venice had. Eberron may well have the necessary governmental infrastructure as well. Some places in Greyhawk might also. But the idea still has to be had, and the need to mass produce must exist. ie: there must be a market to sell all those ships too, otherwise why build them? And since they are reliant on a centralised authority the destruction of that authority will be the end of the production of those standardised parts.
Then there's capital. This is a biggy. Implicit in the development of technology is the ablility to build the necessary infrastructure to build the technology in the first place. This requires money. And of course if there's going to be investment in infrastructure there has to be the possibility of making a profit from that investment. This requires a market for the goods. No market = no investment = no technology (even if the idea exists on paper it won't go into production.)
If this all sounds like it's going around in circles: well it is. The system is one that feeds back into itself. Small changes here can make big changes further along the line. Thus it gets very messy.
To sum up: Technology will develop in much the same ways in a a magical world as in the real world. Magic can act as an impetus to this development by providing power. It can also act as a deterrent to developing regular technology by being a better and cheaper solution to those problems technology would normally be used to overcome. For instance: why develop a pulley system when you can get a tame elemental to lift that heavy object? It all depends on the exact how's and why's in any particular game world.
A rather long way around to get to "it depends" but I thought I'd throw out a few of the ideas that the question provoke in me. Look forward to hearing what others think on the subject.
regards,
Glen