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Wikipedia: An urban legend, more properly a "'contemporary legend'" is a form of modern folklore consisting of stories thought to be factual by those circulating them. The term is often used to mean something akin to an "apocryphal story." Like all folklore, contemporary legends are not necessarily false, but they are often distorted, exaggerated, or sensationalized over time.
Despite its name, a typical urban legend does not usually originate in an urban setting. The term is simply used to differentiate modern legend from traditional folklore in preindustrial times. For this reason, sociologists and folklorists prefer the term "contemporary legend".