The importance of scenery

Scenery in stories... what difference does it make? As a writer, how do you choose what scenery fits a story? As a reader, how does the setting change the plot?

Whether it's the room where characters are, or things they hold, or the town or city in which they live, everything they touch influences the tone and mood of the scene. A coffee mug tells the reader the character is tired. A new set of armor tells the video game player the avatar has succeeded a challenge and gotten a reward. A volleyball tells the player the NPC to whom they speak is a sports player and probably on a team of some kind. And a story that takes place in the kitchen gives a sense of home, of family.

We choose backgrounds carefully in photography and art of all kinds. Stories aren't any different. Have you ever seen a story where the background didn't fit? And what kind of scenery is your favorite?