The setting is a once clear but now polluted lake on the edge of the narrator's hometown. The lake is important because it is a liminal space, both part of the everyday culture the narrator and his friends know and yet separate from it.

The boys reach the lake after passing the markers of civilization, such as malls and housing developments. The lake, once called "Wakan" by the local indigenous tribes for its clear waters, is now filled with civilization's refuse and surrounded by empty beer cans and broken glass. Civilization has invaded its space.

But even though the lake is embedded in reminders of civilization, the narrator perceives it as a place of escape from the constraints of his society. There, he and his friends can get high, drink, smoke, watch a girl swim nude, and listen to rock and roll music. It feels liberating.

The setting is important because the freedom it promises causes the narrator and his friends to act recklessly and get themselves into a threatening situation. The lake offers the illusion of a liberating manhood, the ability to "howl at the moon"; however, in reality, it shows that behaving without constraint can lead to dire consequences. These consequences can include death, which is symbolized by the corpse the narrator encounters in the lake and by the smashing of the narrator's mother's car.

The primary setting of "Greasy Lake" is Greasy Lake, a lake in the worst sort of ecological condition full of refuse and other filth. The first section of the story is set in the streets of a town and is the gateway for the characters excursion to Greasy Lake. The setting of the lake is important because it is a place in an adult world of order and rules where teens can gather in an environment where anarchy and primal lusts and impulses can reign with relative impunity and freedom. The friends of the story, who aspire to be "bad" characters, go to the lake to enjoy some of the primal anarchy and find more than they bargain for. In the midst of a horrific fight with Bobby and another group of bigger and meaner youths--really "bad" characters--the friends undergo a rite of passage, a ritual entrance into adulthood, by getting themselves beaten and their car beaten.

he narrator has an even deeper rite of passage than his friends because he dives into the filthy lake water in an effort to avoid more violence upon his person. There, he has the horror of encountering a floating bloated body, the owner of an abandoned motorcycle on the other side of the lake. Thus the narrator not only has a ritual initiation rite, he also has a baptism into an altered life: He has washed in the waters (dirty waters, not holy) and come up a new man. In this baptism though, he is not a new man because of the holiness of the water but because of the foulness of the water: He has met death and death is what awaits him as a "bad" character. Through his baptism, he rejects that life and his "bad" aspirations, having thus gained a realistic view of life. These are the reasons that the setting is so important to the story, it offers: a primal place of anarchy; a place where battle provides a rite of passage; a place of water baptism into a higher spiritual and moral plane.

How does the setting affect the story of "Greasy Lake"?

The lake is dirty and the stomping ground of teenagers trying to be important.

There are two elements of setting—time and place.  Both of these are significant to what happens at Greasy Lake.  The characters are teenagers who are trying to prove that they are tough, and Greasy Lake is a perfect place to do it.

There was a time when courtesy and winning ways went out of style, when it was good to be bad, when you cultivated decadence like a taste.

The time period is not exactly given, but it is sometime during the mid twentieth century.  The boys like to wear leather jackets and talk about cocaine, but they are wannabees.  Going to the lake makes them feel tough.  Exciting things happen there.  It is where everyone goes at night.

The lake certainly isn’t much.  It is not far from town.

Through the center of town, up the strip, past the housing developments and shopping malls, street lights giving way to the thin streaming illumination of the headlights, trees crowding the asphalt in an unbroken wall: that was the way out to Greasy Lake.

The name sounds terrible, but it is appropriate.  The lake is described as murky, with a small island devoid of any vegetation but scrubs.  Its shores are full of garbage from all of the teenagers who hang out there.  Teenagers spend their nights there to “drink beer, smoke pot, howl at the stars” and listen to rock and roll music.

It is pretty much only in a place like this that the night’s mishaps could happen.  The group of teenagers finds out that they are not as tough as they thought.  The relative isolation of the lake, the time of night, and the depravity of its inhabitants results in the attack on the boys. There is a fight, and they attack a girl, “eyes masked with lust and greed and the purest primal badness.”  Somehow in the midst of all of this, the corpse turns up.