In-game is the state of elements that are inside a game. It is similar to, but predates, diegetic and is often used on a much more practical level. It can be used to describe a variety of elements in a game situation. Areas, objects, people, actions, sounds, etc. can all be defined as in-game or off-game.
Elements that are in-game are treated as if existing in the fiction and can be acted upon by characters.
Players are in-game or "in character" when they are acting as their characters and not themselves.
Most larps will strive towards having a clear definition of what elements are in which state, but it is often up to the individual player to make judgement calls during play. 360º games aim towards having as many elements as possible be in-game.