I think the whole setting/adventure prep is intertwined to the point that prepping one is actually prepping the other, this is under the assumption that there is a certain amount of consistency to the campaign. If a DM decides there is a town callesd Havenfort where X, Y and Z can be found he has prepped both setting(created a concrete place in his campaign world) and adventure hooks(X,Y & Z). The extent to which he adds flavor or not is a purely individualistic thing. Some DM's might describe Havenfort as an average little town and leave it at that, others may decide it's architecture is gothc and crumbling, a miasma of ash hangs over it, etc. I think this can be largely a part of what interests your players as well.
My players are not big dungeon-crawl fans, they find it repetitious and a little boring if it's continuous. They enjoy interacting with PC's, creating a place in the world for themselves, battling monsters and antagonists for a purpose beyond looting their bodies, subplots and a selection of storylines to explore. In order to facilitate this type of play(for me) setting is vital. How can the PC's find a place in the world and affect the world on a grand scale if it doesn't exist? I guess they are more the type to find their own adventures and motivations to do things rather than have me direct them towards what the "problem-of-the-week" is. YMMV
In previous posts me and rycanada have disagreed on including encounters beyond problem, threat, resource and reward. For my games the characters find these things on their own and usually don't require me to prep much if the immediate setting is layed out before them. I would argue in fact that in designing the setting a DM is hopefully seeding these thing within his campaign world while giving the PC's the opportunity to explore the ones that interest them. I find my job is to facilitate and run a place where the adventures they want to be involved in can take place. I also find setting is great for invoking mood, themes I or my players may wish to explore and for a basis of context for them to act upon.
IMHO adventure prep is a natural follow up to what decisions the PC's have made in the game, while setting is the place where they make these decisions.