The reason they are called urban legends is to distinguish them from more ancient (and therefore supposedly more rural) legends and myths, i.e., they are of modern origin. I could find no other reference to rural legends meaning what was mentioned in the urban dictionary, and the vote count there did not inspire confidence. Here's a discussion about the etymology of "urban legend":
http://english.stackexchange.com/questions/45054/what-is-the-origin-of-the-term-urban-legend
An urban legend is a tale which purports to actually be true, but which has little basis in fact--or at least a highly contested factual basis. What makes urban legends "urban" is the fact that they're set in contemporary, urban settings and are widely believed today, as opposed to more traditional legends and myths which are set further in the past and are largely disbelieved by modern audiences. See: en.wikipedia.org/wiki/Urban_legend
It's helpful to note that urban legends are also called contemporary legends, a term that's more literally accurate and preferred by some folklorists. Various other names have been suggested and applied, but urban legend stuck, presumably because it distinguishes in a picturesque way between the kinds of legends told in bygone days, primarily by rural folks in rural settings, and those we tell now (although, in truth, many "contemporary" legends borrow motifs and storylines from traditional folktales of the past). It's also evocative of a recurrent theme in contemporary legends — what one might call the "dark side" of modern life — namely, that new isn't necessarily better, and that many of the changes wrought by modernity, exemplified first and foremost by the impersonal hustle and bustle of big-city life, have come at the cost of the safety, sanity and sense of community our forebears enjoyed. From urbanlegends.about.com/cs/urbanlegends/f/why_urban.htm
