In 2000, it was considered a parallel world according the game manual and 'Hyrule Historia' book published in 2012. But apparently Nintendo had a mistake in the writing of its script, so to help children understand the existence of Termina, they wrote in the new Hyrule Encyclopedia...:
"Skull Kid's memories combined with Majora's dark powers turn the world into the land of Termina"
... which suggests that they modify the history of the saga as well as its chronology as they please.
Remember that a similar case had occurred with Breath of the Wild; they didn't know where to place the events of that title in The Legend of Zelda saga, until they decided place it in a future common to the three timelines...
Going back to the theme of Majora's Mask, it is evident that Link went beyond the Lost Forest to find some place that, instead of being populated by Kokiri children, would be the town of origin, where the forest fairies would appear for the first time. No wonder Navi intended to return to her first rightful place within the Farone region.