When I was a little kid (like 2-5 years) I would tell stories of when "I was a grown up". Like just random stuff about what I did, where I lived, where I went, etc. My parents said they didn't think I was looking for attention because I would tell these stories casually (e.i. not in an attention-seeking manner). Is this normal and what could it have meant? I'm wondering if stuff this could be similar in people with mental illnesses and the like...

My favourite is "When Mummy was a baby in my tummy, she was very silly and she made me sneeze." This was from my male cousin when he was about 3. He was also a dog, as far as he was concerned.
Kids just say cute shit all the time. I rarely get through a day of working with them without being doubled over in pain from what they've said being so damn funny.
As for meaning behind it, I'm not entirely sure, but I suspect it's just the way kids process thoughts and concepts.