This is actually a very practical way of creating stories - set up the stage and see what the characters go about doing. The writer needs to be aware of the larger stage in order to keep the reader interested in understanding what’s actually going on and why.
I remember Stephen King writing in his book On Writing that he once deviated from this approach (Maximum Overdrive, perhaps?) and it really didn't go well. At the time, I thought creating characters, a scenario, and setting and then seeing what happened was nuts, but it's essentially how D&D works (albeit in a group setting) and that's always fun.
