Clearly the setting is used very effectively by Poe in this, as in all his fiction, to help create and sustain the mood of terror and horror that dominates his work. For me, it is highly significant that Montresor takes his victim Fortuanto ever-deeper into his catacombs. Consider the following quote:
We had passed through walls of piled bones, with casks and puncheons intermingling, into the inmost recesses of the catacombs...
At the most remote end of the crypt there appeared another less spacious. Its walls had been lined with human remains, piled to the vault overhead, in the fashion of the great catacombs of Paris.
It is important to note how the description of these catacombs contributes to the general feeling of horror and dread that Poe creates. Upon re-reading the story, we realise that the dead remains they pass actually foreshadow the unfortunate end of Fortunato at the hand of Montresor. However, in addition to this, what is really interesting is the symbolic use of the catacombs. For as we delve ever-deeper we are penetrating not just into the depths of the Montresor catacombs, but also into the psyche of Montresor himself. At the lowest depths of the catacombs Montresor takes off his socially respectable mask and reveals himself for the homicidal maniac he really is, before he presumably goes back above ground and replaces his mask of social respectability.