Milieu is a slippery concept, but understanding it is CRITICAL to developing a satisfying campaign setting. The Miriam Webster online dictionary defines Milieu as:
"the physical or social setting in which something occurs or develops: ENVIRONMENT."
That seems simple enough, but like irony, the actual meaning of the term is much more complex than the simple definition would indicate.
Milieu in it's truest sense is a sensation, a feeling particular to a place and time and setting. A well-written milieu feels like no other place. In that regard, perhaps milieu is something akin to zeitgeist. Coming of age in the 1980s, I didn't understand at the time just how unique that era was. Looking back on it now, I realize it had such a distinctive feel - an impossible combination of jaded weariness and youthful exuberance that somehow fused into something unique - as if it read from Blake's songs of innocence and experience simultaneously. To quote every old-timer ever, "You had to be there to understand."
Part of Tolkein's enduring success with Lord of the Rings, is that the professor developed a unique milieu. If it seems anything less than unique, it is because of the sheer mass of often terrible copycatting that followed. Tolkein built Middle Earth from the lumber of the Germanic and Nordic epics and mythologies. Since those mythologies had a distinctive flavor, and because the professor understood those works so thoroughly, his creations picked up quite a bit of that flavor as well.
Robert E. Howard, the creator of Conan, managed an equally unique milieu with his Hyborian realms. Howard crafted fantastic equivalencies of historical societies. One scarcely needed be a historian to feel the ancient orient's sinewy presence beneath Howard's fabled Stygia with it's sorcery, ancient gods, and alien "otherness." Like Tolkein, Howard worked from historical models (or at least his notion of them) to create a consistency that is often missing from most contrived worlds.
When we look to the published worlds for fantasy RPGs like Dungeons and Dragons, there is a deluge of material available. The publishers of D&D have themselves published something like thirty or forty game worlds. Most of them are, frankly, forgettable. Even Gary Gygax's seminal Greyhawk setting borrows heavily from Middle Earth, but contributes little to make it stand apart from every other Tolkeinesque setting. The D&D flagship world has been Ed Greenwood's Forgotten Realms setting for the past three or four decades, and it is even blander than Greyhawk.
During the publishing flood of the 90s, TSR, then owner of D&D, seemed to be casting about for ANY kind of new game world to publish. Second edition saw some interesting campaign settings come to print. Game worlds like Dark Sun, Ravenloft, Spelljammer, and Al Qadim sold tens or hundreds of thousands of books and supplements to D&D players looking for something new. Bard Games' setting, Talislanta, went so far as to key their advertising as "NO ELVES." Variety is the spice of life and RPG happiness.
During the reign of D&D 3.5, Fantasy Flight Games published one of the more interesting game worlds to date, Midnight. The first review I read of Midnight compared it to Middle Earth is Sauron had won the war of the ring. Intrigued, I bought a copy and eventually picked up most of the supplements that were published for it. While Tolkein's footprint is larger on Midnight than any other published setting, the writers had had the imagination to create an entirely different setting. It was Middle Earth through the looking glass. Where Middle Earth always felt safe to me as a reader, Midnight was the opposite. It was a setting of creeping fears and paranoia. nowhere was safe. NO WHERE.
So, the question at hand is how does one create a uniquely flavored campaign setting now, especially considering the sheer volume of material that has already been written? The answer, actually, isn't so complicated. Ask, "what if?" The first idea for my campaign setting of Ur came from the James Blish novels, Black Easter and The Day After Judgement. In those novels, a billionaire hires a 20th century wizard named Theron Ware to release all of the devils from hell upon Earth for one night. Ware succeeds, but as dawn rises after the night of chaos, the devils have not returned to hell as was supposed. They remain on the Earth, and so a battle begins that pits devils against 20th century fighting jets and atomic weapons.
I loved the novel, especially the idea of what would happen if hell came to Earth. I wrote the Ur campaign in a world where devils had literally turned the planet into a prime-material plane hell and ruled for a millenium. The campaign picks up seven centuries after the devils were largely expelled in a mythical event called "The Homecoming." Ur is a dark fantasy setting. The core campaign area is a federation of nation-states called "The Freelands." Freelanders control the northern part of the great continent, but the central part is held by two evil empires, Olum, and Ubelt. The lands south of the empires are shrouded in mystery.
Freelanders worship a pantheon of deities called the Valorians, who they say seized Ur from infernal control. Most Olumites and Ubelts worship the nine devils who once controlled Ur, or one of the unknown elder gods that ruled Ur before the fall, or they worship not at all.
This arrangement allows me to create mystery cults in the Freelands that are devoted to an infernal or elder deity. To further distinguish Ur from other settings, I infused elements of Christian theology, the notion of celestials and infernals, and I revised the races available for gameplay to reflect a world history of relatively recent infernal occupation. Humanoid races on Ur are various ethnicities of Humans, familiar halflings, and gnomes, and the rare dwarf, all of which fulfill very particular roles on Ur. Then there are the PC races unique to Ur, the diabolical or beatific Grimlings, the older-than-humanity Yfel, the serpent-folk Yuan-ti, the gently giantish Valar, the beast-touched Horned Folk, the savage, but allied to humanity Hobgoblins, and the loose spirits called "The Awakened" that move from body to body.