One thing that is really useful about the distinction is that almost necessarily, there are different scales involved.

Ultima VI was the first of its (mainline, not 'online' or 'underworld') series to not really have the "town/dungeon/overworld" distinction. It got fairly awkward to have towns and the overworld be on the same "layer", because the towns could really only have a dozen or so buildings because otherwise they'd take up the entire overworld.

Breath of the Wild / Tears of the Kingdom kind of have the same issue: there appear to only be a few dozen Gerudo for instance, and only a few hundred people total in the entire world.