Othello’s setback mostly provided by Iago, principally (7)
I believe the answer is:
reversi
'othello's' is the definition.
(board game which the game Othello is based on)
'setback mostly provided by iago principally' is the wordplay.
'setback' becomes 'reverse' (synonyms).
'mostly' means to remove the last letter.
'provided by' means one lot of letters go next to another.
'principally' suggests taking the first letters.
The initial letter of 'iago' is 'i'.
'reverse' with its last letter taken off is 'revers'.
'revers'+'i'='REVERSI'
(Other definitions for reversi that I've seen before include "Game involving turning over captured pieces" , "Game in which captured pieces are inverted" .)