They have set this in an open world South Park by the sounds of it. The Dynamic Duo behind South Park hit the stage at E3 to say that they had (for the first time since creation) to work out how the layout of South Park was and they also went on to explain that this will actually feel like you're in an episode of South Park.
The game takes place, unsurprisingly, in the small mountain town of South Park, Colorado. You play the role of The New Kid, a nameless cipher whose first quest, assigned by his father, is simple: "Go make some friends." Check out the trailer for more! It is set to be released on March 5th 2013.