Eu me perguntei isso antes de mim, descobri que Wikipedia teve a maioria das minhas respostas.

The Forgotten Realms is a fantasy world setting, described as a world of strange lands, dangerous creatures, and mighty deities, where magic and supernatural phenomena are quite real. The premise is that, long ago, the Earth and the world of the Forgotten Realms were more closely connected. As time passed, the inhabitants of planet Earth have mostly forgotten about the existence of that other world – hence the name Forgotten Realms.

A edição AD&D 2nd Guia do jogador para a campanha Forgotten Realms (TSR2142) explica na página 2 que o nome se baseia em sua relação com o nosso próprio mundo, perdendo contato e esquecendo-o:

What are the Forgotten Realms?

Some theorists explain dragons and other fantastic occurrences by postulating parallel worlds. In times past, they believe, travel between mundane worlds — like our own — and more exotic locales was easy and frequent. But we have lost contact, and lost the worlds themselves. Lost, or forgotten.

Abeir-Toril, more commonly Toril, is an Earth-sized planet dominated by a continent in its northern hemisphere. Called Faerûn in the west, it is here that the Forgotten Realms lie. […]

Forgotten Realms era originalmente o local de origem das lendas de fantasia da Terra.

De um perfil em Ed Greenwood em dragão revista #244 (p. 112):

The "Forgotten Realms" name originally came from the notion of a "multiverse" of parallel worlds. Our Earth is one, the Realms another. In Greenwood's original conception, Earth's fantastic legends derive from a fantasy world that we've now lost the way to—hence, the Forgotten Realms. "Concerns over possible lawsuits (kids getting hurt while trying to 'find a gate') led TSR to de-emphasize this meaning," he says.

É assim chamado para contrastar com o "mundo conhecido" original configuração de D&D.