Fantasy is very popular in the writing world right now, and has been since Tolkien's Lord of the Rings was published - and especially since it was made into a movie by Peter Jackson. There is a whole slue of fantasy trilogies, sequences, cycles, and sagas out there now, from Paolini's Eragon to Rowling's Harry Potter, crowding the shelves of Barnes & Noble. There are few people who don't love the epic qualities of Frodo Baggins' journey to Mount Doom and the fight to save Middle Earth from the evil of Sauron, and if you're a writer of fantasy, chances are you've been inspired by Tolkien's books in one way or another. But what is the attraction of fantasy? Why write it?
Well, one big reason is that the concept of "another world" holds a great deal of charm to writers and readers alike. We like the feeling of power we get when we create this other world and populate it with fantastical creatures and evil overlords, and many readers like the newness of a Middle-Earth or a Narnia. Sure, Earth is all well and good, but it gets kinda boring after awhile, you know?
That's great, but writers can go overboard. Easily. That feeling of power and freedom that you get in the creation of a new world can lead to mindsets that damage the story in the end, such as the assumption that, because your novel is of the fantasy genre, readers will suspend their disbelief more readily - because it's your world and you can do what you want in it. This is true, but only to a degree. You obviously have to be more careful writing an historical fiction to get all the facts and figures correct than you do with a fantasy; but all the same, readers aren't necessarily going to accept with awe a character's special powers just because it's fantasy. Your writing has to be believable, no matter what genre it's in.
So how come Tolkien got away with it? He had balrogs and orcs and little round people who live in holes, not to mention a Lidless Eye and immortal Elves, but readers willingly accept all his impossible creations. So why not ours? The problem with that question is that we should never take it upon ourselves to say that if a great and famous author could get away with it, so can we. That's the height of arrogance. But the actual answer to the question comes in a look at how Tolkien crafted the world of Middle-Earth. Most people are aware of the amount of research and behind-the-scenes construction Tolkien went through in The Lord of the Rings, and our initial response is to exclaim, "Good heavens, was he MAD?" But all that crazy work was what made his world believable. He drew from the myths of the Norse and the history of Britain and used those as foundations for the world, the peoples, the backstory, and the legends of Middle-Earth, so in the end, he wasn't dumping readers onto something ungrounded and strange. Middle-Earth makes sense, because it has all the facets of the world we live in.
Most writers nowadays aren't going to go into the depth that Tolkien did, but some amount of research and incorporation of ancient (and, if possible, nearly forgotten) history will add to the depth of any fantasy. Sure, there are readers who will obligingly go along with wild tales and impossibilities, but intricate worlds will pack much more of a punch.