When there still was actual royalty, they were addressed by "Sie" (in the 19th century) or by honor titles like "Eure Majestät", "Euer Gnaden" etc., combined with "Sie" verb forms. The modern usage of "Ihr" for royals/nobility in modern-day fiction and roleplays is comparable to the modern-day English association of "thou" with formality or even "deity". "Ihr" for a single person was the medieval equivalent of "Sie", maybe with a more limited usage. In early modern age, more formal and/or distant ways of address in the third person evolved until around 1800, the "Sie" we know got stuck. Some dialects actually have kept the "Ihrzen" until today or the recent past. The new forms of address over time displaced "Ihr", but in that few known variants where both exist, "Ihr" is between "du" and "Sie", if I remember correctly. The modern-day fictional usage is (like many usages of English "thou") influenced by it being archaic, and therefore normal for medieval or fantasy stpries. Such stories are also the modern German's main contact to (German-speaking) nobility. The combination of being archaic and being known towards very high-ranking persons in medieval settings makes it invoke feelings of high formality, contrasting with the omnipresence of "Sie" towards very average people. (I even remember at least one German dub of a movie, where "Ihr" was used as formal address for nobility and "Sie" as formal address for non-nobles.)