The game Alan Wake, a third-person "psychological action thriller" game for the 360 (and maybe PC?), creates an interesting situation while it makes its fictional world. Alan Wake is a game about a writer and how his horror stories are coming to life. The concept is (naturally) entirely fictional, but what's neat is how the setting, (a small, rural village in the U.S.,) is one that could be very feasible by real life standards. It doesn't take the creation of an entire world to make a good fantasy setting, it just needs something simple to start off of. In Alan Wake's case, a dinky, little town in Colorado was the starting point.
*Warning: Contains Spoilers*
Alan Wake starts out with you (Alan) on a vacation with your wife to relax from the stress of trying to write your next big bestseller. You explore around the town for awhile, then you discover that your wife has been kidnapped. The screen goes black shortly after, and then you (Alan) wake up to fine yourself in a car hanging over the edge of a cliff. It is up to the player to discover what happened between the time they passed out and when they woke up, as well as find Alan's wife. Along the way, you notice that a change has befallen the little town you've been staying at. At night,some of the townsfolk are covered in a smoky black substance, and they become mindless, murderous... creatures that can only be killed a specific way: remove the darkness shrouding them, then the Taken can be dealt with through conventional means. Generally, removing the darkness means shining a flashlight on the target until the darkness is removed, then shooting said target. Silly, in my opinion, but an original idea, for sure.
Day and night plays an important role in Alan Wake. During the day, Alan investigates whatever part of town he's in for clues about his wife, and recovers after what was usually a trek through the woods/prepares for another trek. At night, however, when Alan must leave his little corner of town for the next clue, the Taken show up to try and kill Alan. Since the Taken are weak to light, players usually clutch at whatever light source on hand. But when it gets REALLY dark, that's when Alan should start fearing the darkness, because it will start possessing inanimate objects (piping, trucks, the like,) and begin trying to kill Alan with those, as well. All in all, Alan Wake is a game that make good use of two really simple mechanics in a game: in-game time and a clearly-fictional-but-could-be-non-fictional location.