Knowing your world's history is vital though, and I told him to most assuredly keep it. It was rich and detailed, definitely worth keeping. I mean, take a look at the four books of The Lord of the Rings. First you have this hobbit who might dream of adventure, but well, no respectable hobbit would ever have anything to actually do with one. Then he gets swept away on the adventure of a lifetime where he finds a magic ring and returns home richer than anyone ever dreamed - end of story, and likely that was all that was planned at the time.
The Hobbit was published in 1936 but I can just see it - there was this magic ring. Where did it come from? What kind of magic ring was it? How did it get into the bowls of a mountain? How did Gollum become what he was? Why was he all alone? All these questions niggled and picked at the inside of Tolkien's skull but he was a very busy man, and it wasn't until the prompting of publishers that The Lord of the Rings began to emerge (published in 1954 and 55).
As with all epics, and most any book really, it was vital to understand why people were where they were located, why they believed what they believed, and why this group of people thought one way, while another group thought another way. All of these things, and many more, dictate why people do and say the things they do during the course of your book. It is very important that you, the writer, know these things so your characters can make sense. Tolkien knew this too and the history of his world came out in The Silmarillion, written at the same time as The Lord of the Rings series but not published until many years later, in 1977 by his son. If you are a fan of The Lord of the Rings and you haven't yet read The Silmarillion, I recommend it, but take time with the names. If you skim over them hoping sight recognition will be enough, you'll get lost very soon.
Back to the issue of your world's history: Even if you are writing about two men meeting in a town in small town USA in the year 2013, world history will have effect what they say and how they posture toward each other. Pick two men, each of any race you like; according to Google, we have 3 or 4 major races on this earth.
CaucasianYou might list a few others in there, but mostly, they're just a slight variation of the above, changed by location more than anything else. Whatever your list, it really doesn't matter in this example, but you know that each man will react to the other differently for one reason or another. Heck, have both men be of the same race, and depending on the race, they too will react differently to each other. So, knowing something of your world's history will keep your characters real.
Australian (yeah, I was surprised by that one too)
Knowing your world's history is different from writing it down. Yes, you should keep notes of some sort. Heck, do like Tolkien, and write out entire stories. Why not? The exercise helps, but where you, the writer, needs to know this history, and maybe your characters know some of it, your reader doesn't always need to know it all. Such information included in your book will only weigh it down into the bog of boredom.
I was pleased to come across a spot in the book I'm reading where a long-lived person came to a clifftop overlooking a city. This person had been around when the city was laying it's first foundation stones and raising it's first gleaming walls. The only mention of world history here was 'and then came the orcs came'. So can you imagine what happened to the city then? That was enough. The character did not go into the city. There was no further thought on it. Just one of those heart-string tugs. I thought it was a very nice touch.
Things of that nature are all you need to include as far as history is concerned. Someone might know something about somewhere, and they might spare a thought about it at some point. More would be too much, unless there was a reason to explain it to someone else. Be careful with such explanations though. There needs to be a reason and most people don't go into long, drawn-out stories of history.
How well do you know your world's history?
How do you use that history?