Drop is a spawning of new item/currency/consumable in the area of event.
Types of drops.
1.Monster/Enemy drop: Dead monsters/npcs/players drop loot or allow their body to be search for loot(more realistic)[A], which then triggers a drop.
Monster drop is often unrealistic(unless the monster can wear the item and use it, some game have monster equipment as drops), such as rats dropping swords.

2.Loot Container(Chest) drop: Opening/breaking a container triggers a drop in the immediate area[A].
Always realistic items(that fit the chest), but "effect" of drop isn't.

3.Spawn drop: treasures drop when player enters area.(usually prearranged to setup treasure piles). Treasure may be hidden or require activation of some object to reveal(e.g. lever to enter a room).
Most realistic as no excuses are necessary for pre-spawned items on ground.

[A]Can be replaced by direct to inventory tranfer