"Wizards of the Coast is the publisher of novel lines set within the Forgotten Realms, Eberron, Dragonlance and Magic: the Gathering settings. However, submitted works of fiction need not be written within these settings; we are also looking for original works of speculative fiction, including but not limited to fantasy (of all types), science-fiction, magical realism, horror—essentially, send us your best speculative fiction, and we’ll see if there’s a place for it in Dragon."
So it can be in their settings, but doesn't have to be, if it was only for Wizard's worlds I'd say that would be an acceptable deal since you wouldn't be able to publish your stuff anywhere else. It's also worth noting that this is the exact same thing they do with adventures and D&D articles, which is also something that's not a big deal--so I wonder if it's Wizard's being lazy (only wanting one contract for everything) or they just assume that since they're big enough they'll get 1 person who does submit for every 10 that doesn't.
