Where should I set NODE_ENV?

Could you please elaborate on the appropriate location to set the NODE_ENV variable? Is it typically defined within the project's configuration files, such as package.json scripts or an .env file? Is there a specific convention or best practice that developers should follow when setting this environment variable, especially when working with different environments like development, staging, and production? Additionally, how does setting NODE_ENV impact the behavior of Node.js applications, and what are some common use cases where adjusting this setting is crucial?