This post is about the historical accuracy of a situation: A Lord setup a tournament. The winner of the tournament gets to marry the Lord's daughter. As usual, the Lord's daughter had never really met anyone outside the castle, and had not really talked to any of the contestants before. My question is does this situation exist historically? If so, where and in what time period? It is often shown in stories but was it fantasy or reality? Why did it happen like that?

I'm not aware of any real case like this, and it's also unlikely that this was ever done. A daughter was a much too precious instrument of power to give it to some random club swinging monkey who happened to be lucky in a tournament.

Daughters (and sons likewise) would rather be married to the most promising candidate, i.e. the imbecile son of the 105 year old king living next door (with the intent of sacking their realm). Marriages to settle old feuds and to prevent a strong neighbour from invading were not uncommon either. Even Louis XIV who thought of himself as the greatest king ever had to marry for the sake of peace.
In many cases, marriage was arranged at the age of 11 or 12 already, so there was no chance of winning a tournament at that time anyway.

However, it does make a great setting for the very successful all season "the loser gets the princess" theme that you can find in stories from ancient greece (e.g. Jason) and through all epochs up to "Harry Potter" and "Eragon".

This was a particularly successful theme for songs and stories in the middle ages, as there was no way a serf could ever become anything but a serf like his father. People dreamed of pulling a sword out of a boulder or rescue a princess from the dragon only to become become king, and dreaming was pretty much all they had in their short and miserable lives full of hard labour and abuse.

Today, people usually (except in few countries) have somewhat better lives and more options of climbing up the social ladder, so the theme is mostly successful in books for children and teenagers.

If the lord had a daughter (who was NOT an only child/heiress) and she had no suitors or refused all suitors, or perhaps she was ruined (lost her virginity or publicly suspected of having done so) a lord might theoretically have a contest to marry her off. A bastard daughter, orphaned niece, or late brother's widow might be more likely candidates for this than a lord's daughter. Or maybe the lord hated that particular daughter and wanted to humiliate her. Or he knew that he was military very weak and might imminently lose his own lands if he didn't recruit the strongest possible knight to his side.

In setting up a tournament like this the lord might be strongly expecting a particular knight to win, and possibly quite upset if a surprising person won. Even more likely, the tournament would be between only 2-4 invited knights who were all already suitors for the woman (in which case she would have been introduced to them all), or whom the lord wanted as allies or vassals because of their military strength or wealthy lands. Historically this would not have happened after the 1700s (in Europe) but theoretically it could happen in any patriarchal tribal or feudal society. Actually it might be very common in a society which had harems so a lord might have a LOT of daughters.

I could picture a tribe of native american do something like this--the chief let the strongest bachelor of the tribe to marry his daughter, but I don't know whether it would happen like this and it doesn't fit the description of the original context of the tournament where anyone could enter (thus including strangers not from the tribe).

What does the Lord gain from such a tournament? Do the contestants need to pay to enter? Is there gambling involved, so that the Lord actually get a lot of money?

Or perhaps such a tournament replaces a wedding? (The tournament is the wedding.) The mentality is for the Lord to prove to the other countries that they had the best knights, therefore the Lord is confident that knights from his own country will win the tournament. In the meantime, being able to host the tournament and have the best knights to compete in it brings the Lord epic prestige. So such a tournament is an extreme spending to show off the wealth and strength of the Lord.

The Lord is pretty much saying, "My country is so wealthy, my knights so strong, I am having an open house. Come check it out."

And the Lords that don't have this kind of tournament would appear weak.

Does this description make a lot more sense? Did something like this actually happen?

What the lord would gain would be that the winning knight who marries the daughter becomes a new 'army officer' under the lord's command. And/or the lord no longer has to tolerate an annoying relative and pay to feed and clothe her. In the case where the lord is a king, he would grant knighthood to whoever won the tournament if they were not already a knight. If the lord is not a king, he could still sponsor the fighter, order his knights to take the man as a squire or give him additional training, and ask his king to knight the man.

It is correct that there was an entry fee for participation in a public tournament. This fee was usually used to pay for the tournament's prizes - fine horses, saddles, armor, weapons, or purses of money including a dowry for the bride. The main purpose of a tournament was to attract traders and customers to the fair that accompanied the tournament. If the lord's son participated in the tournament, the family might earn money that way, but the lord typically made money through trade agreements brokered at a fair like this, for example selling all the wool that had been sheared from sheep on his lands that year. The lord and his household would also get to do some shopping of their own, and might receive hospitality presents from visiting nobles. A tournament also fulfilled a similar purpose to a ball in attracting other noblemen and women who might marry the nobleman's other relatives. And yes, another purpose was to show off the lord's military might and intimidate neighbors into allying with the lord instead of trying to raid or conquer his lands.