For example could I make a game with rpg elements like magic, zombies, etc. Does it have to be something we do in the real world?
I don't think so, unless it's stated in the jam description.
I'm certainly going to use something not existing in the real world
Nope, anything goes really, you don't need to make the simulation accurate or base it off of real life if you don't want to.
Ok, thanks I appreciate the responses :). I already have a great idea.