This blog is primarily targeted towards speculative fiction writers. Whether that's epic sword and sorcery fantasy, grim near-future sci-fi noir, far future space opera, or any where in between. But there are specific cases and techniques which are useful to anyone who is writing any sort of fictional product.

What is world building?

At its very core world-building is about making decisions about your setting. A series of truths that define the interactions between your characters and the world around them. It is any decision you make that separates your setting from reality.

Examples:

1. You're using your old school as a setting, but you need a dedicated indoor swimming pool for your main character to experience all the anxieties and excitements that occur within that building.
   

1. You want elves and magic, and the sky is actually purple, but there's an evil race of gnomes that live in the mountain over there who actually hate all surface dwellers and are trying to destroy the world.
   

1. The alien race of Xiwyliipoliopion has spread its wings and colonized half of the S'untir galaxy but has run into the war-like Os'ther'ead race, halting their progress.
   

World building shapes your characters, their homes, their lives, their friends, what they eat, what they read, how they travel, it can guide your plot, affect your language, it is intrinsic to a believable story.

It is part of the trifecta of basic requirements for a story:

Setting, Characters, Plot.

Why is it important?

In each of the examples above a decision has been made, something which changes reality to suit the story you're writing. And that's cool and all, but you can't make these decisions at random for very long before you start to contradict yourself.
Internal inconsistency is the easiest way to jar readers away from your story. Changing from elves with magic to aliens with guns half-way through is just as bad as changing the name of your main character from Dave to Bob, Szally to Th'ue halfway through chapter two.
It's easy to mentally keep track of a few minor changes, as in example 1 above, but for examples 2 and 3 you've got a lot to keep track of and you've not even put pen to paper yet. Imagine 25000 words into the future and you can't remember whether you described the sky as amethyst or puce, maybe it changes with the season?
You need to keep track of each decision, so if it comes up in the future you can make sure it's the same. You need to know the truths of the world, and the lies your inhabitants tell each other.

What tools do I need?

A notebook, or post-its, or a word document. Just somewhere to write things down where you can access your notes and double check anything you're not sure on. Some writers will develop whole wikis for their settings, so they can easily search and cross-reference each decision they have made.

Caveats

Hand-waving:
You don't need to know exactly how you interstellar engine works, so long as it works the same every time, if your plot decides that you need to explain it somehow, then that's cool, make the decision when you need to. Just don't say in chapter 1 that faster than light travel is impossible, then have your characters escape on a stolen faster than light ship three chapters later, with no explanation (at least for yourself) of how. Secret technology/magic is occasionally a useful trick, but abusing deus ex machina throughout your story dulls the excitement of those scenes. If you decided when you made the “no faster than light” decision, but you actually knew that it was possible using secret military technology, then go for it, but foreshadow at least a little bit.

Over-building:
If you make too many decisions too early you can write yourself into a corner. Some inconsequential decision made before you start writing can stall your plot while you fight with yourself over whether it's necessary. If you've not told the reader, or it hasn't had any iterative impact, then don't be afraid to change it. Maybe when you started your elves actually lived on a flying continent above a sea of clouds though no-one your character has interacted with has ever been there, but you end up finding yourself needing a boat trip. That's cool. Change it. It's had no impact yet, but once it's written into the story, it's a truth.