Sweet Home Chicago

Most of John Hughes' movies are set in the Chicago metro, specifically in the fictitious town of Shermer, Illinois (home of Sixteen Candles and The Breakfast Club).

While Home Alone isn't specifically a Shermer movie—the McCallisters are said to be from Chicago, but appear to live in the suburbs—it still has the general vibe of the greater "Chicagoland" metropolitan area. Also, they're clearly in a rich neighborhood: the McCallister house is practically a mansion, and Kevin's parents aren't doing too badly for themselves. (Source)

Overall, the movie depicts the upper-middle to upper-class suburbs of Chicago (circa 1989 or 1990) as being centers of familial warmth, places where the American Dream is thriving. But this prosperous area is threatened by—that's right—Christmas-hating burglars. Kevin successfully defends of Chicago's wealthier suburbs against the forces of anarchy and societal decay, represented by Marv and Harry—wantonly destructive bandits who flood houses after robbing them.

They're not of a piece with the setting; they're a cancer within it.

We don't see a lot of the McCallisters' neighborhood, but we get the sense it's pretty nice. The lady at the drugstore counter is eager to help Kevin determine whether the American Dental Association has approved his toothbrush, and the check-out girl tries to figure out if an adult is looking after him or not—she's nosy, but considerate. So, we get the sense that this community is full of friendly Midwesterners. It's an idyllic setting for sure.

Vive La France

We also get to see Paris, where (the movie implies) the McCallisters never should've gone—Christmas is meant to be celebrated in the good old U.S. of A. (that's John Hughes' subtext). We don't really see much of Paris, just the McCallister kids looking bored at their uncle's apartment, as they watch It's a Wonderful Life dubbed into French.

They quickly head back from France to enjoy what will probably be a merry Chicago Christmas with Kevin. They're reunited, and it feels so good.

Polkatown, U.S.A.

As she journeys back to her son, Kevin's Mom stops in Scranton, PA. There a jolly polka bandleader—Gus Polinski (John Candy)—offers her a ride with his band, as they head to Milwaukee. (Chicago's on the way.) Although Scranton is the noble home of the fictional Dunder Mifflin Paper Company (the company from The Office TV show), Kate's being there is sort of a joke: she's in an out of the way place, and Scranton is a byword for "nowhere."

House of Pain

As for the movie's micro-settings, Kevin's house immediately springs to mind—considering it's the place where most of the action is set. Director Chris Columbus told Entertainment Weekly:

"We needed to cast a house that would work for the stunts and also a house that was visually appealing and, if this makes sense, warm and menacing at the same time. It's the kind of house if you were a kid it would be fun to be left home alone." (Source)

The house's features—like a laundry chute, steps down to the basement, and a tree house—help Kevin construct his booby trap maze to defeat the robbers. As they try to storm this apparently peaceful house, it's transformed into a war zone—a fortress of terror. When the McCallister home is threatened, Kevin knows what to do.

Home for Christmas

Setting isn't just about place; it's about time as well. Home Alone's set during the Christmas season, but it's not a Santa-focused or religious Christmas movie. It's more about the joy of being together with family during the holidays, and how it's not so awesome if you're separated and alone.

Technically, Kevin could've been left at home alone at any time of year, and burglars could've tried to break it. But, by setting the movie during the holidays, there's more urgency—it's more important for the McCallisters to share this time together and be reminded of how much they mean to each other. Kevin's jonesin' for that homey "gingerbread feeling" referenced in the soundtrack.