“What do you have the thermostat set on?”
You're at your uncle's house. It's pretty cold. You'd like your uncle to turn the heat up, and you also want to know why it's so cold there. You ask him this question.
What do you have the thermostat set on?
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A "thermostat" is a device which controls the temperature of a heater. A thermostat allows you to choose a certain temperature that you want a room to be. When it gets warmer than that temperature, the heater will turn off.
Most thermostats control the heat in a house, but some cars also have thermostats now as well. So do hot water kettles, swimming pool heaters, and other devices which need to maintain a constant temperature.
A level which you are able to choose on a device can be called a "setting". We also use the verb "set" to describe putting something on a certain level:
I have the chicken set on low, so it'll cook like that for an hour or so.
When you move them to the dryer, can you set it on low heat?
It was set on "easy" mode, but I still couldn't play it.
These sentences mean nearly the same thing:
The thermostat is always set on 68 degrees.
I always have the thermostat set on 68 degrees.
However, the second one is more personal. You'd only say "I have..." if you chose that setting yourself, like in your own home.