The only recurring settings in my dreams are ones at least loosely based on real places/situations.
I have so many dreams that take place at high school, even though I graduated in 2003. The dream will often focus on one small area of campus and add stuff in, like new rooms and structures.
I have dreams that take place at work. (This and the previous usually include, somewhere, the horrible realization that I'm running late and I'll get in major trouble-- and usually follow going to sleep uncertain of the time I'm due in for work the next day).
Also, there are many dreams that take place around the house and land that I grew up in. Forest, pond, barns, etc. make those dreams interesting. Dreams that take place in my childhood home usually involve something coming after me and others. In those dreams, I'm usually the "hero", leading prisoners away while the would-be capturers are in pursuit. But I've never actually saved anyone... I always wake up before a resolution occurs. All I accomplish is breaking people/creatures free and moving from hiding place to hiding place. o_O
But those settings are never true to life for the entirety of a dream. There are differences and they soon change into fantastic and surreal environments, like burning treehouses (with no trees o_O) in the sky, underground underwater caves, mansions with incredibly complex connecting passageways, skies that ripple, and other fun or scary stuff.
I think that my dreams are just the result of daily thoughts meeting in a semi-unconscious brain in bizarre exercises of "let's make them connect into a story!" (There are a couple of exceptions that lead me to believe that not all dreams can fall in that category. They're too different from my everyday dreams.)
If I go to sleep depressed or in any way stressed, I have nightmares of everyone leaving/ignoring me, or people I care about dying or not being themselves. So the emotions I drift off to sleep in set the tone.
The settings I think are just there because that's where I spent so much of my life and attention. That the settings (and people, situations, "plot") do not stay constant throughout the dream leads me to think that my brain just kinda goes crazy after the opening scenes.