Virtual Worlds generated by algorithms

How does one create virtual worlds? I guess one extreme is to have developers consciously building worlds, planning and organizing everything in advance, allowing no content generated by the players themselves except maybe for the text chats and adventures they experience. The other extreme could be worlds which are almost entirely generated by the users.

On SingularityHub a third possibility is mentioned by Jason Dorrier:

The game’s creators made template planets, ships, creatures, and so on, and then wrote algorithms to iterate on their designs. The software creates untold variation on body parts, shapes, colors, and more. It’s a little like the way our own universe works. Governed by basic physical laws, building blocks, and evolutionary forces, the whirling cosmos self-assembles into the myriad forms we see.

What he describes is No Man’s Sky: