To put a thing into place so it can be used. Installation is setup that persists.
Medieval Latin installare (to place in a stall, induct into office), from in- (into) + stallum (a stall, seat); to install was first to seat someone formally in their place, before it meant simply to put a thing where it will be used.
Setup meant to persist rather than to be repeated — a thing put where it will stay, not merely tried once.