As of the now, I've only had to create one entire world, geographically speaking.
With that one, it started out as a gaming world, so we created bits as we needed them: dungeons, towns, rivers, forests, mountains, etc. As we started to run more stories/campaigns in that world and as they became larger in scope I eventually had to hook them all up, building larger maps. In the end, we needed a world map, so I just scaled from those maps we had and simply drew two circular maps which contained what we already had, adding interesting bits until I had a world.
These days, if I knew I was going to tell a story that spanned an entire world, I'd probably start with at least a rough paper sketch of the world maps and either fit the story in to that or modify it as necessary. So long as it's basically OK (no impossible geography), that'll do.
K