I did my best to tell a bit of its history, and define it in a way that I think works for me. Let me know what you guys think.
I dont think it has to take place in a virtual world so much as it has to take place within that defined game system world with at some point a non game system world and they have to know at some point they are entering this "game world" this allows things like delvers to be LitRPG. I also think the defined game system is a probably unintentional stroke of genius rather then saying video game which has limitations and dosent fit with certain books but if you define game world as a world with certain rules unlike the wider outside world and those rules are defined (by some force within the world) it allows for a broader definition of a game without any added associations
When I say virtual world, I mean any world that's manufactured. It seems the world virtual is the biggest complaint.