basically its supposed to be set in a post apocalyptic world, where Finn is the last human left. In some episodes you can spot broken army jeeps and military stuff strewn around the landscape. They also refer to the "mushroom wars" a couple of time which is an allusion to nuclear war. The creator also says in an interview that the reason for all the magical animals, and characters is that when the world was fully populated, "magic" was divided and spread out amongst almost 7 billion people and so was incredibly weak and almost unharness-able. Now that practically everyone in the world is dead there's plenty of strong magic for everyone to use and thats why the world is like it is in Adventure Time.