A setting is where something is set, or placed. If you want to propose to your beloved, try to choose a romantic setting.
To set means to put in place, so a setting is a placement. If you are a jeweler, you will spend a lot of time making silver and gold settings for precious stones. Setting can also mean context. If you tell me that you spent the whole weekend cooing and clucking, before I decide that you’re crazy, you might explain to me that the setting of that clucking was the birth of all the little chicks on your friend’s farm.