In role-playing games, a Campaign Setting is the setting in which a campaign takes place. Shocking.
Frankly, a good Campaign Setting is key to a good role-playing game, because it fluffs out the game, lending meaning to the dice rolls.
Often, a role-playing game system will come with one or more settings pre-made for gaming groups to use, to take some cognitive load off of prospective GMs, and thereby make it easier for people to jump in (and thus make it easier for people to justify buying more books).
A campaign setting can have many scales, from galaxies, down to a single neighborhood. A well-crafted setting immerses the players, making them care about fabricated places and people that only exist on paper.
- The Grim Darkness of the 41st Millennium; Fantasy Flight Games' RPGs focus on specific zones in particular.
Seriously, there's a ton of these guys, in each and every flavor imaginable, with their own big list.