A castle cut off from the world, in a kingdom struck by a plague
The story is set in Prince Prospero's luxurious "castellated abbey" (which is just a fancy way of saying it's an abbey built up with the fortifications of a castle), hidden somewhere in his kingdom. To call it "cut off" is an understatement. Not only is it "deeply secluded" (hidden in a hard-to-reach spot), but Prospero and his followers have also welded the doors shut, so no one can get in or out. Everyone inside is having one big party; everyone outside is dying to get in. Well, actually just dying.
The story's main action takes place in an elaborate suite of seven colored rooms within the abbey, where Prospero holds the masquerade ball. The suite, which Prospero designed, consists of seven rooms that run in a line from east to west. Roughly a line, at least – as the narrator tells us, their alignment is actually rather irregular, so that from any given room you can only see into one other room. The lighting's interesting too. Every room has one window on either side of it (facing roughly north and south), and the candles to light each room are placed outside the windows in the two hallways that run along either side of the suite. That way the light shines into the rooms through the windows, creates quite a neat effect, especially considering the ball takes place late at night.
The most memorable detail of the suite, of course, is that each room has a different "color theme." The wall hangings, the decorations, and even the windows of a given room are all one color. The first room in the suite – the farthest room to the east – is blue, the second is purple, the third is green, the fourth is orange, the fifth is white, and the sixth is violet. (Yes, violet means something different than purple in this context; it's more of a blue-purple or gray-blue-purple color. Creepier than purple, in other words).
The seventh room – the room farthest to the west – is special. It's hung in all black, but its windows are a deep blood red. There's also a huge, threatening clock in it, which eerily chimes every hour and makes everyone's hair stand on end. So between that and the color scheme, you might as well think of the black room as the Horrifying Room of Death, which it turns out to be anyway.
Now we can all agree that the suite is seriously cool, but why does Poe make such a big deal out of it? After all, the story's not even five pages, yet Poe spends at least a quarter of it just describing the setting Why? We think it's because the setting is the most important thing in the story. But how could that be? Aren't the really important things in a story the plot and the characters?
Not in this case. Remember that Poe's main goal in writing was to produce an effect in his reader (see "In a Nutshell" for more on this). The effect is what matters: everything that gets put in the story gets put in for the sake of the effect. And it seems to us like Poe's most important tool for creating his effect in "Masque of the Red Death" is the setting. It's all about the atmosphere. And the setting is what you're most likely to remember about this story, isn't it?
So how does the setting create the effect Poe wants (most basically, fear)? Think about it. First, there's the abbey, which is cut off from the world. Although it's supposedly safe, the people in it are actually trapped inside. There's something threatening about that sense of confinement. If anything should happen, there's no way out. And the suite itself is buried somewhere deep within the bowels of the abbey. So far as we know, it doesn't have any windows onto the outside world.
Second, we're not just trapped in any castellated abbey; we're trapped in Prince Prospero's castellated abbey. And Prince Prospero seems to be insane. Would you want to be locked up with him? Further, everything about the suite seems to reflect Prince Prospero's madness: the lack of alignment, the exaggerated color scheme, the creepy lighting effects, that really ghastly black room. At the very least that's enough to make us uncomfortable and a little weirded out. At the extreme – the ghoulish black room – it's actively frightening.
Third, the color scheme of the suite has to mean something. The black room practically screams death. Shouldn't the other rooms mean something too? Many critics have suggested the suite actually symbolizes human life, moving from birth (the blue room) to death (the black room). (See "Symbols, Imagery, Allegory" for more on this.) And isn't there something a little too meaningful about it? The rooms symbolize "birth and death" – just about the most profound and weighty thing you could imagine – and here everyone is having a party? A party by definition is supposed to be fun and frivolous. Something doesn't feel quite right about that.
Finally, there's something else about the setting that feels disorienting. In many respects, it feels more like a dream world – or a product of madness – than reality. (For more on this, see "Symbols, Imagery, Allegory.") And on that subject, it's worth noticing something else. We have no idea where Prince Prospero's kingdom is, or when the story is set. (Knights and ladies don't tell us all that much, besides generic "Middle Ages.") Poe gives us no clues. It's as if Poe wants to keep us from making any ties to the real world at all.