Myth means a story or anything delivered by word of mouth that is regarded as holy, sacred, spiritual and/or endorsed by sufficient numbers of people to make it socially potent.
Let me quote the Etymology Dictionary:
1830, from French Mythe (1818) and directly from Modern Latin mythus, from Greek mythos "speech, thought, story, myth, anything delivered by word of mouth," of unknown origin.
Myths are "stories about divine beings, generally arranged in a coherent system; they are revered as true and sacred; they are endorsed by rulers and priests; and closely linked to religion. Once this link is broken, and the actors in the story are not regarded as gods but as human heroes, giants or fairies, it is no longer a myth but a folktale. Where the central actor is divine but the story is trivial ... the result is religious legend, not myth." [J. Simpson & S. Roud, "Dictionary of English Folklore," Oxford, 2000, p.254]
General sense of "untrue story, rumor" is from 1840.
The latter definition here is what myth has come to mean in contemporary English. If you say that Dharma transmission is a myth, then it comes across as "Dharma transmission is untrue".
However, this is not what myth means when we are discussing religion. Again, let's consider another definition:
a. A traditional, typically ancient story dealing with supernatural beings, ancestors, or heroes that serves as a fundamental type in the worldview of a people, as by explaining aspects of the natural world or delineating the psychology, customs, or ideals of society: the myth of Eros and Psyche; a creation myth.2.
b. Such stories considered as a group: the realm of myth.
A popular belief or story that has become associated with a person, institution, or occurrence, especially one considered to illustrate a cultural ideal: a star whose fame turned her into a myth; the pioneer myth of suburbia.3.
A fiction or half-truth, especially one that forms part of an ideology.4.
A fictitious story, person, or thing: "German artillery superiority on the Western Front was a myth" (Leon Wolff).
Myths are sacred narratives which come to have causal power. They also make people do things, refrain from things and/or charge people with institutional authority over others.
In Buddhist religions there are many such myths, many of which are provided metaphysical dimensions to justify and sanctify their existence.
One example is the theory that there is a "precept essence" that is conveyed from master to disciple when an ordination or lay precepts are given. In one Vinaya school it is understood as a "non-manifest form dharma", i.e., a material thing that is passed on down the lineage, which furthermore must be maintained through confession lest it be lost. This easily prompts real life actions and likewise sanctions authority which will be respected and comes with various perks. The males with the higher level of ordination are supposed to sit ahead of everyone else in the assembly.
This all has a function of course and has served people well, but at the end of the day we need to recognize that everything is mentally constructed. Becoming overly emotionally invested in myths is often detrimental to personal and collective well-being.
The idea of dharma transmission historically has not functioned as it has been prescribed, though many believe otherwise and don't recognize earlier and present precedents. Descriptively, it is a social construct which legitimizes institutional authority. You are are ostensibly qualified to run the show and teach if you have Dharma transmission.
As I said elsewhere, I don't believe in this myth. I would rather see a kind of meritocracy where people are judged capable by virtue of their good qualities, practice and learning.
Here's a good paper to read for further consideration:
Richard Baker and the Myth of the Zen Roshi