The Setup Phase (usually just called setup) is a special mode at the start of the game, used to allow players to position their units and fortifications. During setup, gameplay is paused and both sides are able to teleport their units within the available Setup Zones.
CMx1 and CMx2 treat setup differently. In CMx2, setup and the first turn are performed simultaneously. Thus, because you cannot see the enemy during setup you cannot shoot at them in the first turn, even if it would have otherwise been possible.
In CMx1, setup is a distinct phase from the inter-turn orders input phase. During setup, only a very limited set of actions could be taken. After setup is ended, the user gets the input orders phase for the first turn.
Setup zones (zones if the context is not ambiguous) are areas of the battlefield (defined by sets of action spots which need not be contiguous) where a particular set of units may be initially positioned. Setup zones are visible as colored areas overlaid on the terrain. Each side can have up to three setup zones; different zones are distinguished by different colors. (In CMBN, shades of red are used for the Axis player; shades of blue for the Allied player. In both cases the three colors used are unfortunately rather close to each other.)
Units (here including fortifications) may be moved freely within the setup zone they start in. To do this, they must not already have a move command plotted to outside their zone. A unit with no such order can be moved using any move command applicable for it (plain Move for those which cannot normally move). Instead of having a waypoint plotted for it, if the action spot clicked on is in its setup zone the unit will be teleported there immediately. (There is no fatigue or other cost to this movement -- it is setup.) In this manner, you may setup units where desired.
Units cannot be moved outside their setup zone during setup. Units that are not within any setup zone may not be moved at all during setup. Note that all units (not including fortifications) may be given movement or other orders which will be implemented once the battle begins.
There is one exception to the use of setup zones to control where things can set up: target registration points. Regardless of setup zones, TRPs may be freely placed anywhere on the battlefield.
Other Commands in Setup
In CMx2, almost all of the regular commands available to a particular unit while in battle are available during the setup phase. Many commands have an immediate effect and can be done (and undone if possible) instantly and without any typical game costs (time delays, fatigue, etc.). These include:
Other commands may be issued but will only be performed once the battle starts. For example, any area fire command issued to a unit during setup won’t do anything until the combat starts. Move commands which are placed outside of a unit's setup zone will place waypoints normally, and the unit will start moving towards its first waypoint at the beginning of play.
In CMx2, setup and the first turn's orders are given simultaneously; hitting the End Phase button therefore ends setup and begins the action.
In CMx1, setup is a distinct phase from command entry; hitting End Turn takes you to command entry mode for the first turn.