Hi everyone! I'm interested in how other game designers create locations and settings for their games, so don't hesitate and write it here!
To get things going, I'll begin.
I mostly design the setting and locations of my games based on places in the real world, with an element of fantasy to them, to make them look like a place you could actually visit. I find it important to have a balance of settings in the game (as in, not having a single type of area/place/terrain/whatever). I have to mention I hate medieval fantasy (I find it too limited in the sense of having to stick to a certain low level of technology and society), so even if there are medieval locations in my games, they serve as an old-city district.
Elysium: A metropolis based on the crotatian cities Split and Trogir. It stretches in a N-S direction on the western shore of a continent and is roughly 50 kilometres long and about 15 kilometres wide. Its' northern part houses an industrial-commercial district and a historical oldtown, in the middle, there are mostly residental and agricultural areas, and the southern end is a tourist area. The entire city is surrounded by tall mountains from the east and the north and thick forests from the south and is protected by a magitech barrier as protection from the savage wildlife and harsh climate of the outside. It's the home of the game's protagonists and serves a purpose like Midgar from Final Fantasy VII.
Yggdrasil: A giant tree on a small and lonely island in the vast ocean. It's inhabited by tiny insect-like humans, the Liefa, who live among the tree's leaves. It doesn't resemble any real-world locations. The liefas use technology that could be described as the mixture of steampunk and organic: the city centre of the place can be reached by wooden trains and is carved into the tree itself. Yggdrasil itself is the "last resort" of mankind, and is the result of a desperate experiment 400 years before the game's beginning, when the amount of habitable land was drastically decreased.
Lake Glyen-Haramu: A place inspired by the hungarian lake Balaton and Velden in Austria, a lake surrounded by summer houses and smaller towns. It's the first area of a character's individual story, and returns as the final dungeon in a "memoria" form. Two characters, a boy and a girl, spent their summers at this lake and fell in love with each other, sparking the game's plot itself.