The setting is where your story takes place, but don’t choose just a generic setting. Choose a setting that works against your hero.
Think of any scene and it can be made to work better if the setting creates additional problems for the hero. Imagine “Die Hard” taking place not in the confinement of a skyscraper but in an ordinary city. Because an ordinary city would allow the hero multiple ways to escape or call for help, this setting would ruin the entire story. Because “Die Hard” takes place in an empty skyscraper, the hero has further problems to overcome such as not being able to make a call out to the police or find anyone to help him.
In “The Little Mermaid,” the hero (a mermaid) falls in love with a prince. Imagine if she fell in love with an ordinary fisherman who lived alone. There would be little suspense, but make the setting a castle filled with cooks, servants, and guards and suddenly the setting is far more interesting and troublesome for the hero’s mentor (Sebastian the crab) to navigate to help the hero.
Any scene can be made more interesting just by enhancing the setting to make it harder for the hero. In “Legally Blonde,” the hero is a seemingly dumb Southern California blonde who finds herself in Harvard law school, completely out of her element. If instead of Harvard law school, the setting was just another Southern California university, the setting wouldn’t work against the hero as much because it wouldn’t seem as intimidating and strange.
Take any favorite movie and pick any scene. Then imagine choosing a weaker, more generic setting. For example, in “Star Wars,” Princess Leia leads everyone into a garbage chute to escape and they wind up in a garbage compactor. Change the garbage compactor setting to just a janitorial closet and you immediately drain the scene of tension because unlike a garbage compactor, a janitorial closet won’t have walls that could crush you, nor will it be filled with deadly creatures like a snake that could drag you underwater.
Take the bus in “Speed” and replace it with an ocean liner such as “Speed 2” where the hero isn’t confined to a limited space, nor is the ocean liner in danger of blowing up if it can’t keep moving fast enough because on the ocean, the water is wide open compared to the streets of Los Angeles. Is it any wonder that “Speed 2” absolutely sucks as a movie compared to “Speed” all because they changed the setting from the confinement of a city bus to the wide open space of an ocean and a slow-moving ocean liner?
Always find a way to make your setting work against the hero. Avoid generic settings. Don’t put a scene in a bar when you can put that same scene in a biker bar (think of the early scene in “Terminator 2” where the good Terminator steals clothes from tough bikers in a bar). What if that scene took place in a high-end bar filled with young, well-dressed people instead of rough looking bikers? Then the conflict would have been far less interesting to watch.
When you go through your screenplay, examine every scene. If the setting could take place anywhere, change it to a setting that makes it harder for the hero. Just this simple technique can make every scene in your story feel far more interesting.