AbdulAlhazred
Legend
Because information technology is poor to non-existing in most fantasy settings and people would only know the direct surroundings of their village, the road to the city and stories bards tell them which are more often fabrications than the truth.
That such people have no clue about the world apart from what they deal directly with makes sense.
Right. Consider that the average 11th Century peasant never traveled more than 5 miles from home, couldn't read or write, had no contact with anyone more knowledgeable than the local priest, who could maybe read and write Latin and had access to one book, the Bible.
My conception of the way it goes is most lower-class people have no knowledge of anything outside their own area. At best they have heard rumors and old tales of various monsters and whatever. This lore is probably pretty unreliable unless said monsters are encountered now and then. Even then it might be only semi-accurate. If you are lucky enough to be gentry/knightly class then you probably STILL can't read, but will probably have traveled at least in your region, and possibly further in military service. Even so such people are generally ignorant and their education rarely encompassed any sort of education beyond what was needed to perform their social functions. Upper class nobility and such might potentially be educated, but even most Medieval kings were illiterate and had no academic education at all. There were no schools, very few books or records, and just little accurate knowledge.
Even the educated, basically priestly, class of people were appallingly ignorant in most fields of knowledge. At best they had ancient texts, often fragmentary and retranslated/recopied many times to go on, and a few, often distorted, reports from travelers to the Middle East etc.
Now project that into a D&D type world where civilized regions tend to be enclaves, all travel in the adjoining wilderness is deadly dangerous, and there are dozens of different types of monsters. A few will probably be well-known, a few less well known, and most barely rumored. As Derren says, it would be hardly surprising that people would have no clue. I thought 4e's lore was a pretty decent concept, you could make checks of different types to possibly know some key facts about a monster, but it was quite possible your character wouldn't even recognize many of them, and higher level monsters were almost always completely strange and unknown.