What is the role of the setting in the story?

Montresor, the narrator, says that it is the "carnival season," the time just before the Lenten season when many largely Catholic European countries (such as Italy) celebrate—similar to Mardi Gras (or Fat Tuesday, the day before Ash Wednesday, which is the start of Lent). People wear costumes and masks, attending public festivals and indulging in rich foods and, in Fortunato's case, a fairly large quantity of alcohol. This is why Fortunato is dressed in costume as a jester; he's wearing a multicolored costume and a cone-shaped hat with bells. It is this setting, during Carnival, that permits Montresor to disguise himself so that he is not seen with Fortunato and cannot, later, be identified. Once he and Fortunato start to go toward Montresor's home, he puts on a "mask of black silk, and draw[s] a roquelaire," or long cloak, around himself. His costume would not alarm anyone because everyone would be in costume.
Further, there are also lots of parties going on, and so Montresor knows that he can get rid of his servants without raising any red flags. He told them that he would be away from home all night and that they shouldn't leave the house knowing "These orders were sufficient . . . to insure their immediate disappearance, one and all, as soon as [his] back was turned." This means that no one would see Fortunato go into Montresor's house. Because of the story's setting, Montresor can disguise himself and eliminate any witnesses without alarming anyone.