I'm going to use YA novels as examples because, let's face it, that's what I'm into.
In some novels, setting isn't so important. A lot of YA novels have this typical suburban setting. It's Every Town, USA. These kinds of settings remind me of the cartoon Fairly OddParents, which takes place in Townsville. How much more generic can you get? Often these settings illustrate a very teenage way of thinking: all suburban dwellings are the same and cookie-cutter-ness is bad and it doesn't matter where exactly the book takes place because it could be anywhere and it doesn't really matter anyway because suburbia crushes souls. In these kinds of settings, the universalness (or flat-out genericness) is emphasized.
In other novels, setting is paramount. This story could only take place in this town. Instead of the generic aspects of the town being emphasized, the author draws our attention to the specifics. It's kind of a cliché, but really, in some novels, the setting is like another character.
There are pros and cons to both types of settings, of course, and examples in which each is effective. Courtney Summers' books have generic suburbia settings, as does Barry Lyga's The Astonishing Adventures of Fanboy and Goth Girl, but it doesn't take away from the awesomeness of those books. The settings just aren't focuses. On the other hand, just try to imagine Like Mandarin by Kirsten Hubbard and Imaginary Girls by Nova Ren Suma without their settings... impossible. Their settings are so well-drawn, so specific and beautifully described, that they would be entirely different stories if they were set anywhere else.
I, as a writer, have gone both ways. I've written a few books where the settings were pretty much inconsequential. You could set the novel in your own hometown in your head, if you wanted to.
But these days, I've been thinking a lot about what type of writer I want to be, now and in the future, and I've decided that I want to be a very setting-specific writer. I want to set my stories in real places that you could actually go to. I love it when stories have that element. Knowing that, if I wanted to, I could get in my car and drive to Forks, Washington in just a few hours is really cool, and makes reading setting-specific stories so much fun. I want readers of my work to have that element of "this place really exists" that I find so exciting.
I want to be a writer of one setting in particular: Vancouver and its surrounding towns. I've lived here my whole life, I love this place, and I want to share some of its awesome with readers from around the world. I grew up (and still live) in Squamish, a small town outside of Vancouver, and my current WIP takes place there. I've found that I have much more fun writing real places than made-up places.
This way, instead of trying to keep a made-up town layout in my head, I can just plunk my characters down on Cottonwood Road, a three-minute walk from my house, and know exactly where they are, what the place looks like, what it feels like. When I mention a character's house, I know which house it is (and in some cases, I know who currently lives there). I can set the scene in vivid, true-to-life detail, and I know that the book benefits from it.
I'll cap this post here, but I have more thoughts on settings. Stay tuned...