The nature of Oz changes during the course of the original books. The later books emphasize that it is a fairyland where no one suffers or dies. This is not so in the earlier books, where aging and death were assumed to occur as normal. The real reason for the shift is that the author made the books more palatable to small children, with whom they were enormously popular. L. Frank Baum received tons of fan letters and broke continuity to accomodate what his fans wanted. For example, the Wizard of Oz in the first two books was more unscrupulous, having stolen the throne and sold off the heir. But since readers liked him anyway, this was retro-actively changed in later books to make him a more positive character.
However, in most roleplaying games continuity needs to be tighter than in books, because there are multiple "authors" who need to get their assumptions straight. Any given Oz campaign should decide what approach they are taking. I will outline three broad possibilities for the nature of Oz: