Since the theater itself was an open air place, the action of the plays always took place outside. The setting was always some public place, outside; perhaps a city street.
Because of the enormous size of the theater, the actors could not be seen very clearly from far away, so the actors wore costumes to enhance themselves. They wore masks that were fairly lifelike and they wore elaborate robes. They also wore soft boots, so they wouldn't make a lot of noise when they walked on stage. Later in history (around 300 B.C.), the Hellenistic actors made themselves more visually sensational.
Much of what we know about ancient Greek theater we get from studying ancient pottery
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