What does setup_postdata ($post ) do?

Template tag functions rely on global variables to access the post being processed and retrieve data from it or related to it.

The main variable among these is $post, which holds the post object itself.

In your example it’s not explicit, but what is happening is that your loop assigns data to $post. If its name wasn’t $post, you would need to name it explicitly (global $post; $post = $some_other_post;).

However, there are a bunch of other globals and the purpose of setup_postdata() is to fill them with data. If you look at the source, these are:

global $id, $authordata, $currentday, $currentmonth, $page, $pages, $multipage, $more, $numpages;

Note that in most cases you should be calling wp_reset_postdata() afterwards to return globals to their original state.

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