Campaign settings have always held a rather schizophrenic place in this hobby. The first settings, Blackmoor and Greyhawk, were merely the dungeon and the environs around it, extending further only rarely, as the adventurers pursued other plots (and then collapsing back to the central dungeon when new players came in). A great example of this are the adventures of Robliar, Tenser and Erac, who dropped through the chute to China in the ruined pile of Greyhawk Castle, only to adventure back to the other side of the world, drawn like a magnet to the tentpole of the campaign. Other campaign events created new areas, such as the domain of Iuz (a foe who was originally released from the dungeons of Greyhawk), yet these new area always deferred to the original environs (with no sustained campaigning in the new regions).
Yet, when TSR took off, it became profitable to publish fully detailed and designed campaign backdrops. World maps were drawn up for the first time ever, and the local environs around Castle Greyhawk became the "World of Greyhawk" (true, the original Greyhawk was situated on the C&C Society map, but the extent of this map is unknown and apparently not well developed). With published settings, the concept of a campaign backdrop turned from the small, local region to the internation and global scene.
Still, I suspect, most referees ended up designing their own settings for their home campaigns, much like Arneson and Gygax themselves had done. The natural impulse is not to delineate a sweeping world, painting with a broad brush, but rather to go ever smaller, refining the details and going deeper into the very concept of the setting. The former approach is geographic, and creates boundaries that delimit thought even as the "broad approach" is meant to liberate possibilities by making the world seem "big." The latter approach is conceptual, and defines the setting as an idea, not a fixed and stale cartography where the possibility for new events must be fit into a pre-existing framework. They are fundamentally different approaches, one structural and the other theoretical, that produce very different experiences for the referee (and we must remember that the referee is a player too, and that campaign preparation is part of the game).
Interestingly, it was setting stagnation (and setting over-definition), that first drove Arneson to boredom with Braunstein, leading him to create Blackmoor. The Napoleonic scenario had been fully described and defined, and the possibilities exhausted, by a structural approach to the scenario that put characters in relation to each other like chess pieces. Instead of focusing on the politics of the scenario, however, Blackmoor focused on the root inspiration at the core of the setting. As the DCC rulebook says:
"Make your world mysterious by making it small—very small. What lies past the next valley? None can be sure. When a five-mile journey becomes an adventure, you'll have succeeded in bringing life to your world." (Dungeon Crawl Classics Roleplaying Game, page 314)
Here, the sage advice to "think local" should be paired with a conceptual approach to campaign definition. There is world enough in the 50 miles around your central megadungeon: make things happen there! Festivals are thrown, distant merchants arrive, new enemies appear, alliances are struck and broken. The core concept of your campaign inspiration is often difficult to articulate, but one should not flee from this and start detailing regions that no player will likely ever see. Instead, turn back and develop that core concept more and more, mining it for new inspiration, and do not be afraid to let it change as your interests (or real events from the campaign) require. No one truly knows where such a setting will go next, yet it always feels like home.