Monsters are not indispensable to a fantasy story, but they do seem just shy of ubiquitous. If you count other than human races (elves, dwarves, dragera) as monsters then few fantasy works remain without a monster or two. Without a monster, fantasy is a step removed from an alternate history tale.
And that’s fine. I’d hate for the genre to reduce itself to a cut-and-paste exercise, pulling the requisite ingredients from columns A through G. Many swords-and-sorcery tales succeed brilliantly without monsters, relying on some magical or mysterious opposition for the fantastical element. But the point is monsters are a common ingredient.
Probably a great number of reasons. Perhaps the primary reason is to establish that the story is not set in the mundane world. You know you’re not reading a Clive Cussler novel when a troll makes an appearance. Monsters provide an intense injection of the exocitc, they are a flashy component of world building.
Monsters allow for villains without human motivations. A monster’s reasons for behavior can be alien, animalistic, reflexive. Whatever the story needs. The motives can be as complex or simplistic as the writer desires.
At the other extreme, monsters can serve as metaphors writ large. The dragon as a symbol of greed. The zombie as – apparently whatever the writer feels like oversimplifying that day. Frankenstein’s Monster as the outcast, the surrogate for the alienated reader, misunderstood and ostracized.
They can be terrific opponents. Beowulf might be a badass, you can describe how he slew a dozen men in battle. But describe him ripping Grendel’s arm off at the shoulder and suddenly you get a clearer measure of his prowess.
So let’s hear it for the monsters, for all the giants, ogres, orcs, wyverns, and yet to be revealed exotic baddies.