In my paranormal books, I use my everyday world then add a paranormal element to that existing world.
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Or in The Art of Fang Shui (releasing 01-08-10 with Eirelander Publishing) I chose the backdrop of the Indiana Dunes National Lakeshore Park for the setting of most of that book and as the hero (a vampire) and the heroine try to hike their way out of the forest, they encounter fairies, a witch, a goat man, etc.
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Remember, you don't need to physically build a whole new world with foreign sounding names, rules, etc. Oftentimes, you can use the real world and just sprinkle in paranormal elements.
It's that balance of believable/unbelief that makes a good book!
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