A Setting or Campaign Setting is the place in which adventures can take place in a role-playing game. The scope of the setting depends on the kind of game the GM and players want.
Dungeon: Many campaigns are actually just a loosely connected series of ‘dungeon crawls’ – the player-characters investigate some complex filled with monsters to fight, traps to overcome, and puzzles to solve. GURPS Dungeon Fantasy caters for this kind of encounter. Though there may be areas outside the dungeon which are ‘regular guest stars’ like the city where they’re based, the campaign really revolves around finding and looting one ‘dungeon’ after another. Characters are built to optimise their performance in combat situations. The opportunities for role-playing non-violent character interaction with NPCs is generally fairly limited.
These ‘dungeons’ can take many forms: tombs, Evil Temples, defensive complexes where the monsters live and breed, or even whole abandoned cities. Parties will typically go from one to another, the intervals in the rest of the world being passed over as ‘R&R and training time’.
GMs for dungeon-crawl campaigns just need a good map of the ‘dungeon’ and the combat capabilities of most of its inhabitants.
Dungeons have been described as "fancy flowcharts" and it's an apt comparison. There's a lot of overlap between computer programming and early roleplaying rules that goes back before there were any video games. Take a fresh look at almost any computer "dating simulation" game and you should see they are laid out exactly the same way: You have to fight and figure your way through a maze of alternatives before you get the goodies.
City: Many campaigns take place entirely within a single city. Places outside the city are just the names of places where goods come from, never to be visited or to affect the events the player-characters encounter.
City campaigns generally involve characters living at the lower end of the social spectrum. Most feature street thieves and local toughs more likely to be involved in an impromptu street brawl than kitting up in full plate armour for an expedition to destroy an evil temple. The opposition tend to be the City Watch or Guard, organised crime (often both in the same campaign, as the PCs try to steer a path between the two to avoid making enemies on either side), or malefactors trying to use the anonymity and resources of the city to indulge in their particular passions.
A city campaign-setting requires the GM to have good maps of the city and a large roster of NPCs. Most of the encounters will involve negotiating with NPCs: detective-type encounters where the PCs are trying to find something out, persuading powerful people to help achieve the party’s aims, and even routine tasks like finding somewhere to live. But there is also the scope for small ‘dungeon crawls’ where the object of the scenario is to acquire or investigate something in a setting that turns out to be just like a small dungeon – a necromancer’s Tower in the city, for example, may not have the scale of a vast Evil Temple in the wastelands, but there can still be traps, Undead and other guardians, and treasures to loot. A good example of a fictional series which gives the feel of a city-based RPG campaign is the Thieves’ World™ series edited by Robert Lynn Asprin.
World: A much wider variety of adventures become possible when the setting is opened out to include the rest of the world. A typical effect is that as the scope of the setting grows wider, repeat involvement of the PCs with areas or NPCs decreases. If a party arrives in a new city, they will visit a generic inn, blacksmith, armourer, etc. as compared to the known craftsmen of a city-based campaign.
World-based campaigns require the GM to have a much broader resource in terms of maps and locations, but they need not be as detailed. These campaigns are really halfway houses between the pure dungeon-crawls and city-based campaigns. PCs travel much more widely and have more social interaction, but will often find themselves pitched against ‘dungeons’ of one kind or another.
At higher levels, the campaign may grow closer in flavour to the city-based games, but on a larger scale. The PCs have more interactions in social circles than when they started: as powerful people in the county / country / world, they might be asked for ‘favours’ by important politicians, nobility, etc.
The Yrth campaign setting (detailed in the book GURPS Banestorm) is the ‘official’ GURPS product which epitomises a world-based campaign resource. It includes details of all the countries, many of their rulers and significant personalities, and the societies they have produced.
Universe: Universe-straddling campaigns are almost always rooted in science fiction. Most of them are just world-adventures on a larger scale: instead of the PCs’ Baron having a territorial dispute with the neighbouring Count over ownership of the local forest, the PCs’ homeworld will be part of a United Federation of Planets disputing ownership of a strategic hyperspace intersection with a rival Confederation.
Because of the limited connections between the different parts of the galaxy or universe, GMs can treat each adventure in the campaign as a separate environment. Although the background may stay the same, all the encounters are with new NPCs and societies. An example of such a setting in fiction is Star Wars™. Although the Rebel Alliance is fighting the Empire everywhere in the Galaxy, the only things Tattoine, Hoth and Yavin have in common are the core characters of the saga – the ‘player-characters’ of the movies – when they arrive.
An unusual option in the universe category is the time-travel campaign: although all adventures take place in the same world, the gap between them may literally be centuries, so they have no NPCs in common (apart from other time-travellers, probably including the ‘bad guys’ of the campaign), and the settings may be very different in terms of tech level and society. All these combine to make the different eras of a time-travel campaign as separate as different worlds in a galaxy at war.
Multiverse: Some campaigns involve multiverses: a whole series of parallel universes. These are usually very different, which allows players to use the same characters in a wide variety of adventures. Effectively, they are ‘universe’ settings, but the different ‘planets’ where characters adventure will not have the same tech levels, society, historical background or even rules of physics – magic may work in some universes but not others, for example.
Multiverse-settings are usually pervaded by one or more organisations devoted to policing the parallel dimensions, with the PCs being part of one of those organisations. It’s a way for the GM to persuade PCs to move from one world where they have been successful and established themselves as heroes and possibly rich, to another where they need to start all over again. In one scenario they may be flying starships in an attempt to penetrate the blockade of a world, the next game-session they could be hacking at orcs with broadswords to prevent them raiding a small farming village. The Infinite Worlds campaign setting is an official GURPS resource based in a multiverse.
Settings are also affected by the genre of the campaign: two campaigns set in the same time and world may be very different – a straightforward combat-heavy World War II campaign may involve the same history as a horror-style Weird War II one, but the opposition and the feel of the setting will be very different. See the genre page for more details.
There are several official GURPS settings, including Yrth and Infinite Worlds. However, GURPS lends itself easily to a variety of different settings, and it's not necessarily a lot of work for GMs to create their own campaign setting (depending on how much information about the world the players demand).