Canon serves as a framework for a setting, but after that, strict adherence to and advancement of canon along an official timeline is harmful to the setting and its audience.
In a Dungeons & Dragons campaign setting context, canon can be defined as imagined world history up to just a moment ago. It can also encompass dozens of smaller stories, as with the Forgotten Realms setting and its embracing of novels as canon. Game setting canon can also include differences from core assumptions. Defining differences can make a game world stand apart from its peers. You just have to be careful where you point your canon.