A setting includes both the time and place of a story, such as a house in the morning or a city in 1900. Each story may have multiple settings as the plot unfolds. Setting is not always immediately apparent in a story.
Rarely do stories immediately tell the reader where and when it takes place. Instead, hints are dropped throughout that tell the reader the setting. Some stories take place in a very concrete setting that is easily identifiable, such as the house in the morning example. These settings are not open for interpretation. Some stories are much more vague in the setting. This is a good strategy for creating a timeless piece, which is done by leaving out identifying characteristics of the time of the story. The place can also be very vague if the author does not want to limit the story to a particular location's audience.
Setting helps give the reader a mental picture of the story and helps establish the mood and theme of the piece. Stories with dark themes often take place in dark settings, and weather is often used to further elaborate on the setting. The setting can be anywhere from very detailed to very bare, depending on the author. Tolkien, for example, is known for being very detailed in his setting descriptions.