It’s always good to review the basics before diving deeper, so let’s talk setting. Setting has three major components: social environment, place, and time.
Social environment will impact the thoughts, actions, and decisions of the characters. A child growing up in an extremely conservative/liberal home will see things differently than someone who was raised more moderately. Place will impact the story by how the characters interact with it and how it shapes their worldview, as well as physical limitations (i.e. an island vs. and mountain town.) Time factors into not only technology, but in self-perception and social rules. A 1950s woman would be much different than a teen in modern time.
There are also two main types of setting: backdrop and integral.
A backdrop setting is not terribly important to the story. The scene could take place anywhere, but happens to be taking place in that spot. This may be a hallway, sidewalk, nondescript café, etc. These settings need minimal description and attention.
An integral setting is one where the time and place influences the theme, character, and action of a story in some way. Animal Farm wouldn’t have been quite the same if it were set in a shoe store. These settings need more in-depth description and development and may even act as an antagonist, such as in survival stories.
Setting also helps set the mood and atmosphere of a story. The description and the way characters perceive it and interact with it should help develop that tone. The covered bridge in Sleepy Hollow has a very different feel than the Love Lock Bridge in Paris.
When describing setting, Show Don’t Tell becomes very important. Please, please, please don’t spend paragraph after paragraph describing the setting to your reader. Let the reader explore the setting with your character in a way that reveals insights about the character or story.
For example, you can say something about family dynamic by having a teen look through the half-empty kitchen cupboards for cereal that’s on the verge of going stale. It’s a simple detail, but it says a lot about how this teen is living. A character looking in her closet and staring a the only two dresses she owns while getting ready for a job interview informs the reader about her financial situation without having a long discussion about it.