Regular readers know I espouse resting my stories on a three-legged stool of plot, character, and setting. I didn't invent the notion, and I'd give credit, but I have no idea who did. : ) Anyway, there's been some discussion in various internet quarters about plot v character and which should come first in your consideration. I've been surprised to see setting so neglected in these discussions. For spec fic purposes, I believe grounding readers in the story's world is essential, because spec fic always takes place in another world or a variation of this one. In fact, if I had to pick one aspect that draws spec fic readers, I'd say they come to visit new places where extraordinary things happen.
Dave spoke recently about developing ideas to their fullest, and sometimes in short stories, world-building gets short thrift, because we don't have a lot of words to spend. I see this most in urban fantasies where the writer assumes the reader is grounded because it takes place on this planet--even if it is a planet inhabited by werewolves (which are apparently in, if our inbox is any indication). But there are ways to show this strange new world your characters inhabit that don't take up a lot of real estate on the page.
--Dialogue. How do your characters relate to each other? Not like you and I would in ordinary conversation, I hope! How do they show respect; what constitutes an insult? What does their slang sound like? What are the little shortcuts or accents or usage that sets them firmly inside their world?
--Focus on the most important elements that make your world different. You should know of several, but what are the two or three that inform the reader they're not in Kansas anymore?
-- Attraction. What makes for a physically attractive "person" in your world and why? What are valued qualities based on world conditions? (Clue: use them in characters you want the reader to admire).
--Speaking of values: how does your world condition affect personal values? I'm reading DO ANDROIDS DREAM OF ELECTRIC SHEEP? right now. In the Real World most everyone I know has a dog or a cat. We all value our pets, of course. But Dick elevates the rather common phenomenon of domesticated animal to status symbol and it says things about his world without exposition.
--When your character is confronted with a crisis, what is the one thing he or she might do that ties her to her world? A Christian might cross himself, a sailor might curse. What does your character do that sets him firmly in his world?
--And while we're on the topic of crisis, is yours intrinsic to your world? The most interesting crises can only happen in the world where they're set.
These are just a few ideas of many; I'm sure you can come up with more. A final note: don't explain. Just show your characters behaving as they should in their world and the reader will catch on.