Sword-and-sorcery in a quasi-Medieval world is a setting firmly entrenched in our minds. It establishes a comfort zone, a base from which to extrapolate. Everyone recognizes dragons and elves. When players see a preview with dragons and elves, they say, "I played a game with dragons and elves once! It was awesome! Maybe I'll play this one too." At least, that's what developers are hoping for.
Also, removing all modern technology is a reliable, understandable way to sharply limit the player's capabilities. Enemies with knives or fiery breath would be less frightening if you could snipe them with modern rifles. Getting a message to the next town in time to prepare for an enemy attack would not be a problem if you could simply telephone them. Solving a riddle is no problem when you can look up the answer on your Internet phone. RPGs are almost required to take place in low-technology settings. Doing so takes away easy solutions, making room for more heroic derring-do and a greater sense of peril.
Creating a game with an entirely new base is much more difficult, not to mention less likely to sell, if the new setting deviates far enough from the norm. This is why a game like Arcanum stands out. All it did was throw steampunk into sword-and-sorcery (which Final Fantasy has been doing since 8-bit). Both genres are established, yet at the time it was so rare to see them together it made gamers look again and go, "Huh? Guns and spells together in one game? It are not make sense!"
Even games that use different settings tend to stick with something fairly established. Fallout 3: post-apocalypse is an old idea. Mass Effect: the "our future in space" setting has been around ever since we figured out the sky is not, in fact, an encapsulating crystal dome placed by the gods.
Edit: dammit, somebody already mentioned Arcanum.
Really, Jack Vance is the unsung hero of SF.
