By giving the setting at the beginning of a story, it gives the reader an idea of what the plot will look like. If the setting of a story is in a haunted mansion on Halloween night, the reader has an idea that the plot will probably involve ghosts, chasing, capture, etc. Basically any Scooby-Doo movie ever. All in all, the setting gives the reader an idea of how the plot will lay out.
I would say that it would be answer choice number 1. General Zaroff has done this with many people, many times, so he knows the general pattern of the hide-and-seek method among the island.