Can anyone explain when does validation occur when one is trying to create a new record via a script.

I want to initialize some of the fields in the record via the script, however, there are some mandatory fields.

When I execute the script ... which does a New Record/Request followed by a number of set fields (not including the mandatory field,) I get a message that the mandatory field requires a value.

If I reply Ok to that message I then get a message that the New Record/Request has been cancelled ... do I wish to continue?.

Clearly I am doing things in the wrong order ... but so far I cannot find how this order is controlled. What triggers record validation?

Try setting the validation to "Only during data entry" instead of "Always".

in your script, after doing the set fields do a commit record step and toggle the option to skip validation.

See if that works for you.