In contrast to the previous answer, the setting of a story includes time frame in which the tale takes place. It is sheer irony that this story is taking place during Carnival, a jovial, festive time of the year in Italy. It is ironic that the brightly clothed Fortunato is taken from the festivities and thrust into the darkness of Montressor's vaults to meet his death.
In "The Cask of Amontillado," a short story written by Edgar Allan Poe, the setting of the story plays a critical role in such elements as the mood of the story. The mood of Poe's story is eerie and full of suspense; the use of descriptive words and imagery add to the sense of tension and foreboding experienced by the reader.
"The niter!" I said; "see, it increases. It hangs like moss upon the vaults. We are below the river's bed. The drops of moisture trickle among the bones..."
By describing the Fortunato and Montresor's descension into the catacombs, Poe also symbolizes Montresor's descent into darkness and evil. As the two continue onward, the mood becomes more sinister as the setting of the story becomes increasingly frightening.
...We passed through a range of low arches, descended, passed on, and descending again, arrived at a deep crypt, in which the foulness of the air caused our flambeaux rather to glow than flame.
The poor quality of the air, which can barely even keep a torch's flame burning, foreshadows Fortunato's death (dying of the flame). This remote underground location is the perfect setting for a murder.