Let's set the alarm for 7 o'clock.

Literal

Alarm [obj-を] 7-o'clock [to-に] set [volitional-しよう].

セットする is a loanword verb from English 'set.' ~しよう is the volitional form — 'let's' or 'I'll.' 7時 uses the Arabic numeral rather than kanji 七時.