Setting is defined as the physical location and the time of a story. In short stories, one or both of these elements are often not defined.
a. Physical World in which Characters Live
1. Geographical location, topography, scenery, even the arrangement of objects in a room can carry special significance. Note detail.
2. Spot words that ask you to hear, see and feel elements that make up and strengthen awareness of physical setting.
b. Characters Revealed by Setting.
1. Physical objects surround characters in different ways and these differences reveal traits and changes in characters.
a. Psychologically, spiritually, economically and physically.
b. Observe feelings and actions of characters with respect to their surroundings; as setting changes, often so does character.
c. Listen for any remarks characters make about their setting.
d. Look for clues to characters in objects they have placed in their physical world.
c. Setting Revealed by Characters
1. Characters contribute clues about setting.
2. When time isn't made obvious, the reader can often make inferences from objects a character has placed in the setting
3. Dress and dialect contain clues as to historical period in which events take place, as well as to regional setting and social levels within a region.
d. Plot Assisted by Setting
1. Some stories or plots can take place only in certain settings. Actions governed by particular customs and mores.
2. Traditions established over many generations exert great influence on what characters do.
3. Physical nature also creates conditions that affect plot: setting can confine action as, for example, on the sea, or on a mountaintop.
e. Atmospheric Setting
1. The mood is reliant on the words and tone of description; a jingle can be light, full of life, and exciting, or, dark, foreboding, and full of evil.
2. The setting of a Victorian drawing room elicits an atmosphere of restraint and decorum.
3. Atmosphere can be overdrawn (as in many Harlequin romances) and become gooey with manufactured emotion.
f. Theme Revealed by Setting
1. Some authors skillfully use atmosphere to introduce and reinforce the theme of the novel; what happens in setting (flood) happens to characters (changed course of action).
2. Setting may reveal how man sees nature, they may show hate, agony, courage, etc. or men's struggle for insignificant things.
For more information, check out the Open School's discussion of setting.