Some genres rely more heavily on setting than others. Fantasy, science fiction, and historical fiction being the prime examples. Any story or genre in which you remove your reader from their comfort zone, from the familiar, will require considerably more description than an urban contemporary story. Some genres just do it for the enjoyment. Tom Clancey, for example, is fond of giving detailed description of vehicles and weapons and military technology.
But in writing short stories we lack the luxury of pages and pages devoted to description. Instead we get paragraphs. And only a few paragraphs if we're lucky. If we're nutty enough to tackle flash fiction we're talking two or three sentences.
So how does one economize on setting when writing short fiction?
The answer, my friends, is cliche, but I've already discussed that. If you'd like to read further, go here: Managing Story Length
Otherwise, what's the most effective method of introducing setting in your story?
Short, Sweet, and To the Point. Keep it short, make it real, keep it focused.
Short and Focused
Keep description as short as possible. Use words sparingly. Resist the temptation to color it with purple flowery phrases and metaphors. Describe JUST enough to let your reader's imagination become engaged. That's not an easy thing to measure. Hopefully you're a member of an online workshop site or a critique group. Ask for help with this specific topic. Send your story opening (or scene opening) that includes the setting description to your critique group and ask them to read the passage and write a short description of the setting.
Here's a VERY important note: If THEIR description isn't exactly the same as YOUR description, that's OK. What matters is that they can clearly state what the setting is like within a reasonable variation. I mean, if they're describing a space station and you wrote about a golden meadow, obviously there's a problem. Obviously. What matters most, however, is that your description has engaged the reader's imagination and has placed them where your characters are.
Even for a long short story (7000 to 10000 words) scene description shouldn't be longer than a paragraph or two. Other details of the 'tapestry' of the general scene can be inserted into the story later on. Think of that tapestry metaphor. If I give a quick generalized description of a stone castle room, that room will probably have tapestries hanging on the walls--at least in your reader's imagination. Later, if the detail is important, we can focus in on one of those tapestries and the details in the pictures upon it. As the story opens, it's important that the reader see the tapestry, but the tapestry's details need not hinder the progress of the opening.
And there will be times in a story when careful description is important. Keep it as short as possible, keep focused on the details that are relevant to the story's resolution.
Let's look at that tapestry again. I've placed my reader in the scene, my story has worked its way forward to a point in which the tapestry and what's on it become crucial to the story. As a writer I zoom in on the tapestry, and as I zoom in I describe what I see as I zoom. I'll start with a very short general description of it--the colors, the sparkle of the gold threads, the size of it. Then I'll describe the general scene depicted on it in a sentence or two. Then I'll zoom right in on the detail that is crucial to the story. Perhaps a word, a face, a flag, a name, a person. I might spend a little more time describing that crucial detail, but not in SO much detail that I stray from the purpose. For instance, if I want to describe a person on the tapestry I won't describe the style of his shoes, UNLESS those shoes are critical to the story's progress toward the resolution. If a word is crucial I won't spend time giving loving detail of how that word is wrought, UNLESS the detail of how it is wrought is crucial to the progress of the story.
The setting in your head is often so vast that to include it all in your story would mean writing a twenty volume tome. Tracy Hickman spends long hours creating worlds for his novels that are vastly larger and more complex than what he actually includes. What does he leave out? He leaves out exactly what will not contribute to the progress of the story.
J.R.R. Tolkein on the other hand... Tom Bombadil. 'Nuf said.
So why isn't it OK for you to write like Tolkein?
You can if you want to. It may even be published. Tolkein created a pool of readers who love that kind of stuff. But in the larger scope of things, those readers constitute a fairly small market share. And there we're talking about novels. For short stories you create for yourself an entirely new set of problems. Specifically, paragraph upon paragraph of detailed description swallows up the story. Short story readers are often a whole different breed from readers who live and breath Tolkein and his ilk. They want a lot to happen in a short amount of time. So wasting the opportunity to entertain a short story reader by bogging the story down with description is a killer.
I've read a few stories in my flash fiction slush pile in which the writer begins the story in the first pargraph, spends the next 900 words on description or background material, then completes the story in the last paragraph. Where's the story? To be frank, who cares. *sigh* A story is a progression from one point to the next to the next to the next. Long description stops forward progress. Stops it dead.
I like good description. No, I LOVE good description. So in this 'Sweet' section I'm just going to share some descriptive passages with you, and what they do in the scope of the story:
An ore wagon thundered by, murdering sleep for newcomers who weren't accustomed to the sound.Territory by Emma Bull. A small detail that goes a long way toward placing the reader in the scene of historic mining town, Tombstone, AZ.
On the other side of the hill a red sun blazed with terrible fury across a parched wasteland. The river melted away into mud there, and then into dry, cracked earth. The hills around the plain were barren, brown, runneled with crevises and caves. The huge, blind tower rising out of the center of the plain was dwarfed by the dragon coiled around it.The Tower at Stony Wood by Patricia A. McKillip. An example of taking a look at that tapestry at the right time in the progress of the story. Our hero is on a journey and is about to enter the lair of the dragon. It's important that the reader see the contrast between the previous scenes and this, and our hero's progress from greenery to barrenness in order to create the proper mood.
Vicky was fanning herself with her scarf even though the T-bird was air-conditioned."Children of the Corn" by Stephen King. The first sentence of setting description in this short story. We learn in dialogue, two sentences later, that we're in Nebraska. No further detail is needed to firmly set the scene in the reader's imagination. Further details will be brought out as they become important to the story's progress.
Little Peggy was careful with the eggs. She rooted her hand through the straw till her fingers bumped something hard and heavy. She gave no never mind to the chicken drips."Hatrack River" by Orson Scott Card. The opening three sentences of this short story written as Card was developing the Alvin Maker series. This opening puts us nicely in a chicken coop with a little girl, places us in the country (by the vernacular), and tells us something about the determined nature of Peggy, AND helps us understand that things are likely to get messier than the chicken drips.
Over the great door of an old, old church, which stood in a quiet town of a faraway land, there was carved in stone the figure of a large griffin. The old-time sculptor had done his work with great care, but the image he had made was not a pleasant one to look at. It had a large head, with enormous open mouth and savage teeth. From its back arose great wings, armed with sharp hooks and prongs. It had stout legs in front, with projecting claws, but there were no legs behind, the body running out into a long and powerful tail, finished off at the end with a barbed point. This tail was coiled up under him, the end sticking up just back of his wings.The Griffin and the Minor Canon by Frank Stockton. A rather detailed description/opening paragraph that serves the purpose of focusing the reader on the Griffin as the main point of conflict in the story.
The carnival had come to town like an October wind, like a dark bat flying over the cold lake, bones rattling in the night, mourning, sighing, whispering up the tents in the dark rain. It stayed on for a month by the gray, restless lake of October, in the black weather and increasing storms and leaden skies."The Black Ferris" by Ray Bradbury. In this opening paragraph, Bradbury not only sets a scene, but uses the scene description to set a bleak mood.
Some online articles on Setting:
Setting in Historical Fiction
Using Real Places as Story Setting
And a book:
Setting: A Writer's Digest Elements of Fiction book.