Setup is the tool responsible for setting up the MMDF directory hierachy. It runs through the various directories and, if it discovers they are not present, will prompt the user to create them. It will not change an already existing directory but will complain if it thinks that it's set to the wrong mode.
The -dnt flags are all equivalent, and turn on tracing mode. No actions are taken but, similar to the -n flag in make, the usual actions are reported to the user.
Usually, setup is run as superuser to allow it to create the relevant directories with the right ownership and modes. Setup is reasonably verbose and diagnostics should be self explanatory.