definition
An establishing shot indicates where and when the action is taking place. It is a shot from a distance that sometimes shows the character in the location.
director's intention
The director's intention is to make sure the audience understands where the action is about to take place.
impact on audience
Usually beautifully composed, the establishing shot is packed with visual information to inform the viewer of where/when the film is taking place but also has an emotional impact based on the artistic composition of the shot.