I don't want to sound jaded or take anything away from the creativity of world designers, but I think Fantasy is the predominant MMORPG genre for a very simple reason: It's EASY.
Let's say for a moment that we decided to make an MMORPG out of a modern-day realistic genre. What types of characters can we offer a player? We have combat, stealth, charisma, and intelligence-based skills in our real world.
Combat in a modern setting is fairly similar to any other genre, even if the weapons aren't always the same. Guns would probably be the weapons of choice for most "adventurers" based on a combination of range and lethality, but more archaic modes of fighting still exist and can be used and identified with.
Stealth wouldn't change too much. Technology can make stealth less viable, but so can magic "detection" spells, racial vision traits, and the like.
Charisma in a realistic world could mean anything from a supermodel using looks to influence NPCs to a diplomat or clergyman invoking a silver tongue. This can all be viable if developers put some effort into it (one of EverQuest 2's flaws, in my opinion, is the utter lack of Charisma. Diplomacy is one of the few things Vanguard got right!)
Intelligence offers a lot of possibilities for careers to roleplay, but not as many in-the-moment systemic options. If a fighter gets shot, a realistic medic can't charge into the middle of a firefight and fix up the wound on an active combatant. A chemist could whip up any number of concoctions to solve a variety of problems, but chemistry takes time and often non-portable equipment. Same goes for, say, Engineers.
The suspension of disbelief inherent in a Fantasy genre where we're told "magic exists" makes it all so much easier. Even when it's not something a PC himself can do, you can always end a plot-line in a manner such as, "With Blud'Spirt the Demon Lord out of the way, Sparklefart the Sage was freed and cast his Spell of Temporal Bridge-Shifting, thus instantly summoning the Ancient Span of Prince Fulbar out of the past, which in turn enabled the Swamp Elf army to cross the Chasm of Shadowy Rainbows."
Drawing up blueprints, hiring a team of contractors, and overseeing the erection of a large bridge just doesn't "pop" in the same way.
Now of course, I'm just talking about a modern, realistic genre here. SOE's upcoming The Agency looks to be set in a semi-realistic environment, but it's a hybrid RPG/Shooter. That's a big difference from a straight-up RPG.
I have played tabletop RPGs in my day that were "realistic" in their genre and rules. They never quite stuck with me, and based on the big-name tabletop games I can think of off of the top of my head, the less-fantastical RPGs never did too well with anyone else, either.
If I'm going to play an RPG, would I really want to play a technical trainer whose height of adventure is braving the wilds of Southern California traffic every day? That's not an RPG - that's a Sim. MMOSIM was tried once, and it didn't work too well.
What if I played an RPG where I was a soldier in Vietnam? There's plenty of grim and grisly plot to keep things interesting, but come on, I learned about that stuff in school. Gaming isn't homework!
We don't play RPGs to do "normal" stuff. We play RPGs to have experiences well beyond the bounds of what could be accomplished in normal life. As such, ANY successful MMORPG that emerges on the market is going to be "fantastic" in nature.
Look at the genres we have seen thusfar. Swords & sorcery "fantasy," science fiction, and superhero. Those are the big MMORPG players. Are any of them REALLY different?
Sci-fi like Star Wars or Star Trek hide behind technobabble to recreate the same basic things that magic objects accomplish in a Fantasy world.
Superhero powers are almost identical to magic in effect, but with different backstories.
Alien races and/or mutants in either of the above are little different than the humanoid races and horrible monsters that we have in an EverQuest.
ANY game (all MMORPGs that I know of) where you can die and re-spawn is purely fantasy. Even sci-fi cloning doesn't make sense if you have retention from after the time you dropped off your DNA.
So fine, basically all MMORPGs can be boiled down to "Fantasy" if we argue things a certain way. But that's not what the original question was. Clearly, the intent of the original question was regarding Swords & Sorcery Fantasy as opposed to other storytelling milieus.
I'm going to stick with my "it's easy" explanation:
- Origins - Earth's history contains hundreds of creation myths that already have a D&D feel to them (or, more to the point, D&D borrows from ancient creation myths). Making a new story about how a group of gods created the races as their children yadda yadda isn't really new at all. That doesn't make it uninteresting, but it does make it easier than coming up with something totally original.
- Magic vs. Technobabble - People expect gadgets to come with some means of explaining how they work. Magic just IS. We wiggle our fingers a certain way and fire shoots from our fingertips. Sometimes there's code words involved, or even reagents, but apart from potion recipes, magic rarely has to explain that Part A was glued to Part B and infused with Radioactive Substance Q to produce Effect XX. Magic tends to measure will or intent in ways technology can't.
- MUDcestors - The graphical MMORPGs of today were born from the text MUDs of yesterday. The text MUDs were designed by (heroic) nerds who wanted to bring their tabletop D&D games to life. D&D was born from the legacy of Tolkien.
What else needs to be said? RPGs have evolved to offer a wide variety of choices over the years, but High Fantasy is where it started. It's been bred into us. We gamers know and comprehend the ins-and-outs of wizards and warriors, mazes and monsters, and all-powerful rings better than anything else.
Game designers are artists. They want to take the visions in their heads and bring them to spectacular life. Most of those visions, thanks to how we grew up, are of talismans and dragons. If that's your passion, then that's the sort of game you'll be best at making.
From a business standpoint, games also need money. EverQuest was huge while Earth & Beyond sucked the pipe. Tell a publisher or venture capitalist that you're going to improve upon the EverQuest formula and out comes the blank check! Now World of Warcraft has the throne, and companies want a piece of THAT fantasy pie instead.
So far, games like City of Heroes and EVE Online haven't been able to achieve a high enough profit margin to spawn many competitors. After debacles like Auto Assault, really unique MMOs are going to be hard to secure funding for. That's what has led us to the market we have today, and I don't think it's going to change significantly in the near future.
...for the record, I'm not necessarily happy about that. I love high fantasy, but I do want to see new things as well!!