Environment, setting, location, world; regardless of the word used to describe it, the place in which a game occurs is hugely important. A game can be defined by its place, like Rapture defines BioShock and like the USG Ishimura defines Dead Space, or a place can drag a game through the mud of boredom, like how the Hinterlands drags down Dragon Age: Inquisition and the dullness of Mordor weighs on Middle Earth: Shadow of Mordor.
A game’s setting usually falls somewhere along this spectrum: The better the setting the more it improves the game, the worse the setting the more it hurts the game. Makes sense. It’s rare that you find an interesting setting that still somehow hurts the game. Knee Deep is that rare, unfortunate game.