The first of the rules is also of enormous importance when applied to fantasy:

World-building should be quick and merciless. In a novel, you can spend ten pages explaining how the 29th Galactic Congress established a Peacekeeping Force to regulate the use of interstitial jumpgates, and this Peacekeeping Force evolved over the course of a century to include A.I.s in its command structure, etc. etc. In a short story, you really need to hang your scenery as fast as possible. My friend and mentor d.g.k. goldberg always cited the Heinlein line: "The door dilated," which tells you a lot about the surroundings in three words. Little oblique references to stuff your characters take for granted can go a long way.

Stories (and, to go a step further, even novels) are much more interesting when the author allows the reader to figure out the world for herself.  Lengthy or overt exposition, especially when written from a character's point of view, is unrealistic and usually the mark of an amateur.  People don't go around reviewing the founding of their nation by the Prophet King Delorean in their heads as they herd sheep, for example, and they don't have expository conversations in which they conveniently explain what to them are normal aspects of everyday life.  When people talk to others with whom they share a common knowledge, they do so obliquely, because the other person will know what they're talking about after even the most cursory mention of it. 

Think about how you might tell a story about, say, a friend going to vote for President (a fairly complex process unique to democratic nations that is nonetheless immediately understood by a single word) in an email to a friend.  You would probably start by saying something like "On the way to work Wednesday morning, he stopped to vote."  Imagine for a moment that you are telling this in the voice of an American (albeit in the third person) to an American reader.  Not only would you not have to explain that your friend was voting to elect someone to political office, but it would also likely be unnecessary, if the story concerned recent events, to even mention that the election in question was for President of the United States.  An American, at the time, would understand all of this as soon as he read the words "he stopped to vote."  A non-American would not, however; but give them enough examples, and she would probably be able to figure it out.  In a fantasy story, then, world-building should be present for the careful reader, but not thrown in the reader's face.

There are times, however, when nothing but a full account of past events or of how something works in this world will suffice.  Luckily, fantasy authors have the crutch of the Bard character and of the mentor character who teaches the young farmboy his history.  Like any such device, this can be used expertly or inexpertly.  The experts make of it an imaginative and engaging addition to the story; the amateurs use it as clumsily as any other expository technique.  Good examples that come to mind are the smoke-wreathed conversation between Gandalf and Frodo in Bag-End in The Fellowship of the Ring and Doctor Morgenes drinking beer and cleverly using the socratic method to teach a befuddled Simon his history as the latter sweeps out the Doctor's chambers.

Short fiction is where most authors begin developing their talent.  It is also a great resource for those readers craving more stories about their favorite fantasy worlds.  George R. R. Martin, Orson Scott Card, and many other writers wrote short stories set in their worlds long before they wrote the epics that made them famous.