One of the hardest parts of making a fantasy or science fiction world can be names. Not just for people, but for metaphysical concepts, alien races or awe-inspiring devices/weapons. When writers don't want to make up a new word, they'll often take a short, evocative term and capitalize it. The practice is still so commonplace that J. R. R. Tolkien (who was a language professor at a respected university) decided to use a trick of combining Capital Letters Are Magic with commonplace words from languages he'd made up for fun in his spare time to create all of his fictional-but-now-well-known fantasy names. Here on this site we get a lot of tropes this way as well, such as the The Load and The Chick. *
(Of course, some of that's due to the wiki software's conventions).
In universe, a character may comment on how they can "hear" the Capital Letters.
Ideally, this will give the concept a simple, descriptive name that doesn't sound too dopey. Unfortunately, this can cause hiccups when they want to use the word in its usual sense, and often leads to eye-rolling from jaded fantasy fans.
Alongside ordinary words that take on special new meanings, neologisms are frequently capitalized as well. If fantasy characters talk about smeerps instead of Smeerps, then it may throw the reader off. (Even if these characters are Smeerp farmers who wouldn't think of the animals as "special", and who also ride horses instead of Horses.) Well-established fantasy concepts, such as dragons and vampires, don't get this treatment. It seems that lowercase words feel more orthodox and "official", and it's therefore incorrect for a fictional world to have a "new" one without the characters somehow noticing that something is different.
Brand Names Are Better is another example of the effect. After the "magic" has gone away, you get Stuck on Band-Aid Brand. (The new power to copy papers is Xeroxing; years later, the everyday task of copying papers is xeroxing.)
Compare The Trope without a Title and We Will Use Wiki Words in the Future (when two or more simple words are used in this way). Contrast Call a Rabbit a Smeerp, which is putting fantastical names to common things. A popular alternative is Phantasy Spelling, though such terms are often also capitalized.
Also the Grunts, Jackals, Drones, Hunters, Engineers, Brutes, Elites, and Prophets, which all have non-English species names anyway
Unggoy, Kig-Yar, Yanme'e, Mgalekgolo (Lekgolo being colonies not integrated into suits or machines), Huragok, Jiralhanae, Sangheili, and San 'Shyuum if you're curious.
The Neverborn and the Primordials from Exalted, as well as the titular Exalted. Lunar and Solar castes also get a rather negative form of this treatment from the Immaculate Order, with titles such as the Deceivers, the Blasphemous, the Frenzied, etc...
Gregory Maguire's Wicked makes an important distinction between animals and Animals.
Likewise, capitalization serves to distinguish sentient hominids of Ringworld, such as Hanging People or Grass Giants, from non-sentient ones such as vampires. Subverted in that, while this convention is used in the (English) text of the last two novels, it's stated in-character that the trade-language of Ringworlders actually uses a prefix to tell them apart.
White Wolf seems to be in love with this trope, and any RPG they publish will have multiple instances of this. Aside from the Exalted examples already listed above, we have the Beast and Vitae from Vampire, the Wyrm, the Weaver, and the Wyld from Werewolf, the Second Breath and the Wyld again from Exalted, Legend, Fate, Knacks, Birthrights, and Scions from Scion, and numerous other examples that I can't think of off the top of my head.
"Note Important Capital Letters. Mages Use Lots Of Capital Letters."
From a Naruto Fan Fic: "Capital letters were very useful when dealing with Gaara. They helped to distinguish between sand, which got in your shorts, and Sand, which could kill you."
Geneforge: the Shapers create and modify living organisms by Shaping.
One may seem to encounter this Trope when reading Works written in the 17th and 18th Centuries, as it was then the Custom to write all Nouns with capital Letters. The Readers may be assured it's all in their Heads.
This is still the custom in a number of languages, most notably German.
Used frequently by Katherine Kurtz in her Deryni works to distinguish magically-enhanced things/processes from analogous ordinary ones (healing vs. Healing, veil vs. Veil). Also used in particular phrases coined to describe magical objects and processes, such as Mind Seeing, Truth Reading, Truth Saying, Transfer Portal.
More 'official' than 'magic, but Cryptonomicon, by Neal Stephenson, has a passage in which the main character navigated a small island. It is so small, in fact, that there is only one of most things-hence titles such as 'the Car', 'the Street', and 'the Squeegee'.
This could have been the name of the forest, though, in which case it would have been justified.
The Sci Fi Channel's miniseries The Lost Room is based around a series of about one hundred items called Objects that possess strange properties. Objects featured include The Key, The Pen, The Glass Eye and The Bus Ticket.
Keys to the Kingdom again, which has the titular Keys, only one of which even resembles a key.
The Front Door, Nothing, The House, The Will... he murders it.
The Fence of The Amory Wars is another name for Heaven, where the Prise hang out (another name for angels).
This trope is probably why so many Harry Potter fans are convinced that "wizarding world" is capitalised when it isn't inthe books.
The series does have a few examples of these. There's the Trace (a term which, interestingly, only comes up a good deal after the concept has been well established). Places can be made Unplottable, words can be Tabooed, and people Stunned. In most cases, though, novel magical concepts/devices will be capitalized and a made-up word, such as Occlumency (not, say, Clouding). Or a pre-existing word, such as squib or snitch, will be used in so unrelated a manner that it feels like a made-up word. As is common in other fiction, the capitalization trend doesn't apply when it's something the author didn't invent: wands and dragons versus Time-Turners and Thestrals.
Doesn't enter the above category for being a group instead of a race: Lost has the Others.
Oracle of Tao does a combination of science and magic, and pre-existing scientific terms are lowercase while that of Magic are uppercase. A magical portal joining two worlds is a Gate, the world of nonbeing is the Void, and Light and Darkness refer to balance of the two (and since it is Taoism-based, they are normally coupled). Then we have various scientific processes like cloning, which are lowercase for the mundane science, and capitalized for Cloning magic. Likewise, when referring to a light or dark room, these two are lowercase. There seem to some inconsistencies in this though...
Supreme Commander has a fictional religion called, "The Way."
So does (Gene Roddenberry's) Andromeda, though it seems like theirs is based on/inspired by Taoism.
the Knight And Rogue Series has Gifts, which give people the ability to detect potentially dangerous wild magic, as well as a slew of other randomly assorted unreliable abilities such as knowing if your in danger (which can be anything from being stalked to having your aunt trying to arrange your marriage) or taming animals.
Used quite a bit in the Tales of the Five Hundred Kingdoms series. The Tradition is, like the Force, always capitalized, as are many roles and patterns.
Storyteller Mark Lewis sometimes remarks that when he first read Winnie the Pooh he noticed that some words were capitalized even though they weren't proper nouns. Much later he asked a British friend why these words were capitalized, and said friend responded "Because they are Important."
The Super Mario Bros. powerups are always capitalized. It's not a mushroom, it's a Super Mushroom, it's not a fire flower, it's a Fire Flower, etc.
