Spelling and pronunciation
Cervantes wrote his work in an early modern form of Spanish, heavily borrowing from Old Castilian, the medieval form of the Spanish language. The language of Don Quixote, although still containing archaisms, is far more understandable to modern Spanish readers than is, for instance, the completely medieval Spanish of the Poema de mio Cid, a kind of Spanish that is as different from Cervantes's language as Middle English is from Modern English. The Old Castilian language was also used to show the higher class that came with being a knight errant.
In Don Quixote there are basically two different types of Castilian: Old Castilian is spoken only by Don Quixote, while the rest of the roles speak a modern version of Spanish. The Old Castilian of Don Quixote is a humoristic resource – he copies the language spoken in the chivalric books that made him mad; and many times, when he talks nobody is able to understand him because his language is too old. This humorous effect is more difficult to see nowadays because the reader must be able to distinguish the two old versions of the language, but when the book was published it was much celebrated. (English translations can get some sense of the effect by having Don Quixote use King James Bible or Shakespearian English phrases.)
In Old Castilian the letter x represented the sound written sh in modern English, so the name was originally pronounced "ki-SHOT-eh "[kiˈʃote]. However as Old Castilian evolved towards modern Spanish, a sound change caused it to be pronounced with a voiceless velar fricative sound (like the Scottish or German ch), and today the Spanish pronunciation of "Quixote" is ki-HO-teh [kiˈxote]. The original pronunciation is reflected in languages such as Astur-Leonese, Galician, Catalan, Italian, Portuguese, and French, where it is pronounced with a "sh" or "ch" sound; the French opera Don Quichotte is one of the best-known modern examples of this pronunciation.
Today, English speakers generally attempt something close to the modern Spanish pronunciation of Quixote (Quijote), as [dɒŋ kiːˈhoʊteɪ], although the traditional English spelling-based pronunciation with the value of the letter x in modern English is still sometimes used, resulting in /ˈkwɪksət/ or /ˈkwɪksoʊt/. In Australian English, the preferred pronunciation amongst members of the educated classes was /ˈkwɪksət/ until well into the 1970s, as part of a tendency for the upper class to "anglicise its borrowing ruthlessly". The traditional English rendering is preserved in the pronunciation of the adjectival form quixotic, i.e., /kwɪkˈsoʊtɨk/ or /kwɪkˈsɒtɪk/, defined by Merriam-Webster as the foolishly impractical pursuit of ideals, typically marked by rash and lofty romanticism.
Cervantes' story takes place on the plains of La Mancha, specifically the comarca of Campo de Montiel.
En un lugar de La Mancha, de cuyo nombre no quiero acordarme, no ha mucho tiempo que vivía un hidalgo de los de lanza en astillero, adarga antigua, rocín flaco y galgo corredor. (Somewhere in La Mancha, in a place whose name I do not care to remember, a gentleman lived not long ago, one of those who has a lance and ancient shield on a shelf and keeps a skinny nag and a greyhound for racing.)—Miguel de Cervantes, Don Quixote, Volume I, Chapter I (translated by Edith Grossman)
The story also takes place in El Toboso where Don Quixote goes to seek Dulcinea's blessings. The location of the village to which Cervantes alludes in the opening sentence of Don Quixote has been the subject of debate since its publication over four centuries ago. Indeed, Cervantes deliberately omits the name of the village, giving an explanation in the final chapter:
Such was the end of the Ingenious Gentleman of La Mancha, whose village Cide Hamete would not indicate precisely, in order to leave all the towns and villages of La Mancha to contend among themselves for the right to adopt him and claim him as a son, as the seven cities of Greece contended for Homer.—Miguel de Cervantes, Don Quixote, Volume II, Chapter 74
In 2004, a multidisciplinary team of academics from Complutense University, led by Francisco Parra Luna, Manuel Fernández Nieto and Santiago Petschen Verdaguer, deduced that the village was that of Villanueva de los Infantes. Their findings were published in a paper titled "'El Quijote' como un sistema de distancias/tiempos: hacia la localización del lugar de la Mancha", which was later published as a book: El enigma resuelto del Quijote. The result was replicated in two subsequent investigations: "La determinación del lugar de la Mancha como problema estadístico" and "The Kinematics of the Quixote and the Identity of the 'Place in La Mancha'".
Researchers Isabel Sanchez Duque and Francisco Javier Escudero have found relevant information regarding the possible sources of inspiration of Cervantes for writing Don Quixote. Cervantes was friend of the family Villaseñor, which was involved in a combat with Francisco de Acuña. Both sides combated disguised as medieval knights in the road from El Toboso to Miguel Esteban in 1581. They also found a person called Rodrigo Quijada, who bought the title of nobility of "hidalgo", and created diverse conflicts with the help of a squire. 
Because of its widespread influence, Don Quixote also helped cement the modern Spanish language. The opening sentence of the book created a classic Spanish cliché with the phrase "de cuyo nombre no quiero acordarme" ("whose name I do not wish to recall"): "En un lugar de la Mancha, de cuyo nombre no quiero acordarme, no hace mucho tiempo que vivía un hidalgo de los de lanza en astillero, adarga antigua, rocín flaco y galgo corredor." ("In a village of La Mancha, whose name I do not wish to recall, there lived, not very long ago, one of those gentlemen with a lance in the lance-rack, an ancient shield, a skinny old horse, and a fast greyhound.")
The novel's farcical elements make use of punning and similar verbal playfulness. Character-naming in Don Quixote makes ample figural use of contradiction, inversion, and irony, such as the names Rocinante (a reversal) and Dulcinea (an allusion to illusion), and the word quixote itself, possibly a pun on quijada (jaw) but certainly cuixot (Catalan: thighs), a reference to a horse's rump.
As a military term, the word quijote refers to cuisses, part of a full suit of plate armour protecting the thighs. The Spanish suffix -ote denotes the augmentative—for example, grande means large, but grandote means extra large. Following this example, Quixote would suggest 'The Great Quijano', a play on words that makes much sense in light of the character's delusions of grandeur.
La Mancha is a region of Spain, but mancha (Spanish word) means spot, mark, stain. Translators such as John Ormsby have declared La Mancha to be one of the most desertlike, unremarkable regions of Spain, the least romantic and fanciful place that one would imagine as the home of a courageous knight.