Canon is continuity in the story. Everything which is canon is relevant and consistent with the established history and plot line in the story.

Fun fact: The term Retcon (or retroactive continuity) is used after the fact to explain why something which is original canon was actually incorrect, and merely was perceived incorrectly by the story's viewer, aka we the players.

Example: The original Star Trek Klingons were portrayed by using poor bronze makeup and no ridges on their foreheads. 38 years later in the series "Enterprise," they explained this was caused by a genetic virus which included human DNA, and caused the loss of their ridges for several generations.