docs: Add setup, testing and coding style sections to the CONTRIBUTING.md

Signed-off-by: Cagri Yonca <cagri@ibm.com>

Author: CagriYonca

CONTRIBUTING.md

@@ -75,22 +75,54 @@ local git repository using the following command:
 git commit -s
 ```
 
-<!--
-## Communication
-**FIXME** Please feel free to connect with us on our [Slack channel](link).
-
 ## Setup
-**FIXME** Please add any special setup instructions for your project to help the developer
-become productive quickly.
-
-## Testing
-**FIXME** Please provide information that helps the developer test any changes they make
-before submitting.
 
-## Coding style guidelines
-**FIXME** Optional, but recommended: please share any specific style guidelines you might
-have for your project.
--->
+1. **Clone the repository and install dependencies:**
+   ```shell
+   git clone https://github.com/instana/python-sensor.git
+   cd python-sensor
+   pip install -e ".[dev]"
+   ```
+   
+   This installs the package in editable mode with development dependencies (pytest, ruff, pre-commit, etc.)
+
+2. **Set up pre-commit hooks:**
+   ```shell
+   pre-commit install
+   ```
+   
+   This automatically runs Ruff linter and formatter before each commit.
+
+## Testing and Code Quality
+
+Before submitting a pull request:
+
+1. **Run tests:**
+   ```shell
+   pytest
+   ```
+
+2. **Check code style:**
+   ```shell
+   ruff check ./src ./tests ./tests_aws
+   ```
+   
+   Or run all pre-commit checks:
+   ```shell
+   pre-commit run --all-files
+   ```
+
+**Note:** All pull requests to `main` must pass GitHub Actions checks (Ruff linter + test suite).
+
+## Coding Style
+
+- Python 3.9+ compatible code
+- Follow PEP 8 style guidelines (enforced by Ruff)
+- Include copyright headers in new files (see [Legal](#legal) section)
+- Use type hints where appropriate
+- Ruff automatically formats code on commit via pre-commit hooks
+
+Configuration is defined in [`pyproject.toml`](pyproject.toml). For advanced Ruff usage, see [Ruff documentation](https://docs.astral.sh/ruff/).
 
 <!-- Reference links -->