Well, the Renaissance led to a new appreciation for the human mind and body--called, not surprisingly, humanism--which was something of a reaction to the medieval notion of the body as no more than a pod for the soul. The humanists, becoming reacquainted with the learning of the Greeks and Romans, began to see people as more than merely receptacles for the spirit. This also spawned a new realism in the arts and some interesting works in the field of letters, such as Ersamus' "In Praise of Folly."
The invention of the movable type printing press cannot be over emphasized. For the first time in Western history, books could be reproduced mechanically rather than by hand--making them less expensive and spurring literacy.
The Reformation was in many ways the offspring of the inquiring spirit of the Renaissance and the rise of humanism. For centuries the majority of people had no access to the Bible and were wholly dependent on whatever the clergy told them in matters of religious faith. Martin Luther challenged this idea and even translated the Bible into German, feeling that every Christian should be able to read it for himself (and this also encouraged literacy). Remember, too, that many abuses had grown up in the Church by this time, such as the selling of indulgences (a sort of buying one's way into heaven, usually done for the benefit of dead relatives or friends) and that a lot of human tradition had obscured the faith as well. I won't even try to get into the fact that many of the leaders of organized religion in the West were more akin to wolves than to shepherds, so you can figure that the time was ripe for a housecleaning of sorts.
The new era of questioning religious authority led to a splintering of the religious uniformity of Europe, not merely into "Protestant" and "Catholic," but also among the Protestants themselves, leading to such labels as "Lutheran" or "Calvinist," and a good deal of turmooil in England between those who were all right with the changes Henry VIII made in the English church (which was still essentially Catholic, the one exception being that Henry, not the Pope, was the head) and others who felt that it needed to be "purified" of its "Roman" practices (you've heard of the Puritans, I'm sure).
How did this set the stage for the modern era? I'd say the distinguishing hallmark was the open questioning of long-held views, whether concerning religious belief and practice or the notion that the univers was geocentric. This led, in turn, to the Scientific Revolution of the 17th century and new political theories as well, paving the way for the Enlightenment.