While co-creation is a more radical concept, "making it up as you go" is the method that Gygax and Arneson used to make Greyhawk and Blackmoor.
That is fine for them. The setting is what interests me. I am not saying the DM needs to have every single detail planned.
1. Map: Countries, forests, mountains, major cities and towns, etc.
2. Deities: Their spheres/domains. Tenets and vestments for the clergy, tailored spell lists. Are there animosities and, if so, how does they play out among the priesthoods?
3. PC Races
4. Cultural information. General information on the culture For example:
a. Subsistence: Are they hunter/gatherers? horticulturalists? agrictulturalists?
b. What are the religious practices? Ancestral worship led by Shamans? Demon worshipers? Are they led by Druids trying to preserve the "Old Way" against a new religion? Do they worship a pantheon of deities? etc. Do they practice ritual sacrifice?
c. What is the political organization (e.g., band level? tribal? plurocracy? mageocracy? matriarch?)
d. What is the economy (e..g, barter? market? mixed?)
e. What is the technology? Is it stone age? bronze age, iron age? How does this affect the starting armor and weapons?
f. body adornment practices, naming conventions.
g. What are the views on law and punishments? Are there unusual practices (e.g, shunning, banishment)? Do they practice more draconian measures (e.g, cutting on limbs and taking out eyes)? Rolemaster Standard System type cultural information. Common classes, class variants, common themes, prohibited starting classes
RMSS notes on cultures are a good example
h. how do they view other races or cultures? Are there racial or cultural animosities?
5. Who are the key NPCs and organizations that players starting in a culture would have heard of or might know.: Who are the key people and organiztions? Who rules the country or culture? What are the key organizations (churches, bard academies, druidic council, wizard academies, thieves guilds, etc.) Who are notable NPCs (Head priests for each church, Captain of the guard? Just names and
6. Any important things in current history? Is the King off leading the army in a holy war? Has someone usurped the throne? Is the ruler having young females abducted for sacrifices or for unknown reasons? Did one country invade another country? Did a dragon recently, drive out dwarves from their ancestral caverns?
7. `Some interesting locations: dungeons, ruins, creatures of note.
I am not saying the DM needs to hand their players dozens of pages in full details, but these are the things that help ground characters in the setting, and give the players potential hooks (should they choose them)- especially, when broken up and headed out as necessary.
1. A page or two giving a few sentence about the following: summary of the setting, an over view about each individual PC races and culturals; and an overview of the deities in the campaign
2. Another page or two of more detailed information for each specific culture and given out to a player interested in having their character being a member of that specific race/culture.
3. Another two pages or less of specific information/notes relative to a given choosing a specific class or organization given to the player (if needed). Player wants to be a cleric or paladin of a specific deity, you hand them the specific informaiton.