I like stories where the magical fantasy world is:
Somewhere other than our world. It's separate, different and inaccesible, eg Lord of the Rings, Discworld, Curse of Chalion
Somewhere else but accessible from our world, eg Narnia, Elidor, Andre Norton's Witchworld
All mixed up with our world, but the magic is hidden from most people, eg Garner's Weirdstone of Brisingamen, War for the Oaks, Elizabeth Bear's Blood and Iron, The Dark is Rising
Other, I'll explain in the comments.