The importance of the setting lies in the way that it is the topic of a story that Oskar remembers his father telling him at the end of the first chapter of the book. This is a story that we only hear in its entirety later on in the book, but it introduces the setting of the Borough and the rich, fantasy world in which Oskar dwells, where it becomes possible to believe that there was originally a sixth borough that became separate and where you can draw conclusions from some of the flimsiest pieces of evidence around.
When we think about the story in terms of its content, at the same time we become aware that it introduces certain themes that are particularly key to the novel, and predominantly the theme of separation is introduced. The way in which the sixth borough splits away from the mainland and separates friends, families and lovers of course parallels what happens through the death of Oskar's father, and the way that Oskar has to deal with his father's absence and the intriguing messages he leaves behind on the answer machine.
The setting of the borough is also important because it becomes the stomping ground of Oskar as he tries to locate the Black who the key belongs to and it leads him into a series of new relationships that he forms.