Internal canon is concerned with matters in the fictional world.
External canon is concerned with how the fictional world relates to other stories.
An example of internal/external canon
As a kid I had a toybox with a mix of toys. There were some superheroes, lots of freebies from McDonalds, some wrestling federation action figures and a lot of random assorted figures.
I had a very clear and internally consistent canon. Characters changed their attitudes and views in line with the events that I played out. Action -> Consequence.
I had absolutely no external canon. I never explained how the bad guy from Mulan, Superman, WWE wrestlers, dinosaurs and three batmen were all in the same location. It didn’t matter.
Maintaining internal canon is crucial
If internal canon is inconsistent then the game can lose verisimilitude, players can lose their willing suspension of disbelief and trust in the game-masters ability to model the world can plummet.
We want to maintain internal canon. The one big exception is that when safety tools and internal canon clash, the safety tools always win.
How can I eradicate external canon?
During your session zero say the following:
This game’s canon will be internally consistent, but it will not be externally consistent.
Make sure the players understand what you mean by this. Make it clear that characters and locations from other canons may show up in this game.
Why should I eradicate external canon?
- You can insert pop culture characters like Batman, James Bond, Buffy, Walter White, Dracula and Lara Croft into your game. You might need to modify them to fit the world.
- You can insert objects like Excalibur, Sting, Death’s invisibility cloak, Mjolnir, The Golden Fleece and the Staff of Moses.
- You can insert locations like The Shrieking Shack, Yggdrasil, the first Halo ring, The Emerald City and the Garden of Eden.
- You can even remix across genres.
Have the player’s knowledge approximately match the character knowledge – the characters have heard rumours, myths and folk tales. They have a decent general idea of the character/object/location, but don’t know the specifics. Different players might even know contradictory versions of a story. Good. That means their characters have heard different versions of the tale.
Now player knowledge = character knowledge.
You have characters debating which myth is the real story.
You have lore-dumped by just dropping a name.
Your game prep has become lighter.

Design Notes
If you’re publishing your stuff, make sure you aren’t breaking copyright.
Superhero comics and movies (and Star Trek) break external canon all the time.
So do other shared universes like the kong vs godzilla one.
Reboots like the 2004 Battlestar Galactica series, or adaptations from book to tv/movie often break external canon.
Myths do this a lot – does King Arthur get his sword from a stone or from a lady in a lake?
If we can accept big franchises killing their external canon, we should let ourselves do it too.