Do you mean the "Set" drop down box that's in the 'new action' dialog box? In the actions panel there is a button at the bottom called "create new set". You can click on this to create a set folder. You can then arrange your actions into different folders (sets). The drop down is asking which of these sets you would like to put your action in.
If this doesn't answer your question post back saying exactly when and where you see "set selection" appearing.
set selection" is just an action command to do with selections. It will be different depending on what the action is.
Run the action and then go back through your History states (ctrl+alt+Z) to se what the action does.
EG: Set Selection
To: transparency channel
will select the Pixels in the layer - the same as ctrl+clicking on the layer thumbnail in the Layers palette.
& Set Selection
To: none
will remove the selection.
Moe: It could have been a real ugly situation, but luckily I managed to shoot him in the spine.
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