Why did Shakespeare choose to set the play Othello in Venice?

As Shakespeareguru notes, Shakespeare based many of his
plays on historical information. Interestingly, only Act 1 of
Othello is set in Venice; Acts 2-5 are set on the island of
Cyprus.  This setting isextremely important because it facilitates the action of the
play. 

Between Acts 1 and 2, Othello, along with the other
characters in the play, make the journey from Venice to Cyprus in anticipation with a
naval conflict with the Turks.  However, during that time, the Turkish fleet is
shipwrecked in a storm.  Thus, Othello and the others arrive on the island of Cyprus,
and since there will be no war, they have nothing left to do except celebrate. (They
celebrate Othello's marriage and the fact that the Turks have been shipwrecked). 
 

Because the characters are away from their homes, and
because they are relatively unable to just pick up and head back to Venice after such a
long journey, Iago's pan is more effective.  On the island of Cyprus (during the
celebration on the first night), Cassio gets drunk, gets in a fight with
Roderigo/Montano, and is stripped of his lieutenancy.  Obviously, this incident
facilitates Iago's plan.