Setting locates a story in time, as well as in place.  In other words, setting answers two questions: When? and Where?

When?
This aspect of setting covers both minute details, such as time of day, day of the week, and season of the year. It also covers the more encompassing details of time, such as year and era. It is very important to pay attention to time during the story and make details consistent. Year and era play a major role in dictating how characters should dress, speak and behave, for example, you should probably not have an openly gay character running around fourteenth century Rome.

Where?
This aspect deals with where the story takes place in relation to specifics (such as indoors, at church, in a schooner) as well as where the story takes place in relation to general locations (such as country, climate, planet). Again, a major part of how characters dress, speak and behave is dictated by where the characters are. People dress differently in church than they do in the woods, and characters dressed differently in 1365 than they did in 1965.