Whether you’re writing fiction or non-fiction, setting is important. It’s how you make readers feel as if they’re “really there.” Without a fully developed setting, there is no “there.”
Right away, in your first act, introduce us to the setting the same as you would a character. Don’t just use physical description (though that is certainly helpful); show us the “character” of the place. What kinds of people live and work there? What’s the main industry, and how does that affect the character of the place, e.g., the smell of hog farms in a rural valley, the artistic types populating a college town, the legacy of segregation in a Civil War outpost, etc. As you can see, it helps to know some of the history of a place, even if its relevance isn’t immediately obvious.
Needless to say, don’t “infodump” all this at once. Introduce the most obvious details at first, as Truman Capote does in the opening lines of “In Cold Blood”:
“The village of Holcomb stands on the high wheat plains of western Kansas, a lonesome area that other Kansans call ‘out there.'”
Later, drop in the other telling details where appropriate, remembering to slant them to convey feelings like contentment, excitement, boredom, fear, etc. For a great example of this, read “A Rose for Emily” by William Faulkner; note all the ways he uses setting to convey the feeling of stagnation and decay.
Fiction writers may protest, “But my story takes place in an entirely fictional universe! Can’t I just make it up as I go?” Of course you can. However, by having a clear “history” and “character” of your imaginary place, you bring it to life and make it seem real to readers. Read “The Hobbit” and/or The Lord of the Rings trilogy by J.R.R. Tolkien and note how much history he created for Middle Earth, and how that makes it seem all the more real and substantial.
In any well written story, the setting permeates and informs everything. Don’t shortchange it.