Setting refers to where and when a story takes place, but it also includes the historical context.  The story is set during a ball of the Blue Vein Club, and the story takes place in the mid- to late-nineteenth century when African-Americans had fewer rights than whites.

This story is a prime example of how setting influences a story.  This story could not have been told the same way if it took place today.  In the time the story takes place, darker skinned African-Americans have fewer rights than whites and that was the norm.  We know that the Blue Vein Society was established “shortly after the war” and we can assume it is the civil war from the date the story was written (1898).

The specific setting is the ball of the Blue Vein club, which is a gathering of social climbers.  People with lighter skin (light enough to see their blue veins) join in order to advance themselves.

There were those who had been known to assail it violently as a glaring example of the very prejudice from which the colored race had suffered most…

It is true that such a club would not exist if it were not for the social and racial constraints put on its members by society.  As the story goes, we learn that it is not really possible to lift yourself above your social status in this society.