I also think sticking by rules limits the imagination if writing, for example sci fi of fantasy and to say either of these needs to be realistic doesn't make sense. Surely if it's a world I have created, I decide what way the story developes? I have been told it's lazy to not stick by these rules where as I think it the twists and unexpected incidents, even the unrealistic ones that make a story interesting.
You're forgetting the other part of the equation: the readers. And that's one mistake many writers make -- you're the writer, right, so you can do whatever you want, right? Well, that is fine if you never want to be published.
Unfortunately, these rules and guidelines and best practices, etc. are there because there are readers on the other side of the fence. If you just make up anything as you go that defies logic or are totally unrealistic, you risk not able to communicate and convince your readers and keep them involved in your story. All it takes is for one reader to say, "yeah, right! I don't believe it" to take her out of the story and make her close the book (or worse, throw it across the room, against the wall).
It's not to say you can't come up with your own thing and still manage to create and tell a compelling story. But the more you deviate from the "rules" and still make it work, the more brilliant you have to be. Hemingway defied many rules of his time but we all know he was, indeed, brilliant...
There are books out there (JK Rowling, anyone?) that are so imaginative and compelling and fascinating and yet they follow the "rules" to great extents. Did Rowling say, "oh, the rules stifle my creativity and imagination"? Did her readers?
To me, that's an excuse for not learning and reading and learning and improving your craft and learning... that's not understanding and respecting the craft of a writer. To that I say, suck it up.
And here's the thing: we have to learn and know the rules before we could break them. Otherwise, we'd just be like little children running around thinking we could really make something appear in a box. That's cute, if we're six.
See if I understand it: My characters can do some fantastic things as long as I explain the why and how and don't bore the reader.
Yes, it's called world building and you're setting up rules of your world. You can have flying pigs but your world should support that phenomenon.
Can I also ask why no back story in first three chapters? Is it accepted to add if it's is kept short, so say a few lines as long as the story is moving along?
I never heard of this "no back stories" rule. The advice is that your story should grab and hold the readers from the get-go instead of bogging them down with pages and pages of back stories... it's not really a rule, but a "best practice" because that's what readers like... that's what agents and editors look for, particularly if you're talking about the first three chapters. But sprinkling of background information, tiny flashbacks, etc. is perfectly fine as long as the story moves along and you continue to grab and hold your readers.
Did you read the graphic novel Watchmen or see the movie -- it's full of back stories and flashbacks, but they're always integrated with the on-going plot (and it starts with the inciting incident, not 30 minutes of back stories).
I think your questions illustrate a basic misconception. Many writers believe these are hard and fast rules: no prologues, you must hook the readers in the first sentence, start with a major conflict, no back stories... blah blah blah.
What they're missing is that all of these rules are just ideas and practices to support the underlying concepts and philosophy of great storytelling. So instead of being hung up on these specific guidelines and rules, focus on the concepts and philosophy, such as: hook your readers and keep them entranced in your story and help them suspend their disbelief. If you can do that, then you can make pigs fly.