Why is Storybook called a "UI playground"?

Because Storybook is a place where interface components can be "played with" in isolation:

• Without the whole application around it. The component does not depend on routes, global state, or other modules.
• You can change props, states, styles, live. It's like a lab: what happens if you pass this text? What if the button is disabled? What if the screen is dark?
• Every "story" has its own scenario. Every component can be tested on edge cases: loading, error, empty state, and so on.
• Everything is visual. You see the changes right away, no need to build or navigate between pages.

That kind of space is called a playground, because you can safely experiment with the UI, as in a sandbox.