Heat settings

That is what it is designed to do. Generally, windows fog up when you have high humidity inside the car. When you turn on the defroster, it actually uses the A/C compressor to lower the humidity. You can try turning on the A/C when using the vents (yes you can use the A/C and heat), this should reduce the window fogging.

Gary explained it very well. I might add that your floor mats can be a big source of moisture this time of year if you live where it snows a lot. I dump the slush off my floor mats every night when I get home. Wet clothes can add moisture too.