This is a difficult sonnet especially if one is unfamiliar with the tendency of poets of the past to...
...clothe in the sonnet shape much professional intercourse with his patron.
In other words, English writers would often write to compliment or praise a patron, someone who gave financial support so the artist could pursue his craft. Authors would also pay homage to fellow-artists...
Even those self-reliant writers of the day who contemned the sonnet-sequence of love...were always ready to salute a friend or patron in sonnet-metre...
To the first book of Spenser’s Faerie Queene, Sir Walter Ralegh, the poet’s friend, prefixed two sonnets...
One was "Methought I saw the grave where Laura lay." As is mentioned in the sonnet, Spenser wrote The Faerie Queene, an epic poem honoring Elizabeth I. The allusions in the sonnet also require some deeper examination.
The first six lines refer to the poetry of Petrarch (English for Francesco Petrarca) who is credited with inventing the sonnet form of poetry in Italy. (It was introduced to England by Sir Thomas Wyatt, but the English version is most known for the man who best embraced the form and made it his own—William Shakespeare.)
Methought I saw the grave where Laura lay,
Within that temple where the vestal flame
Was wont to burn; and, passing by that way,
To see that buried dust of living fame,
Whose tomb fair Love, and fairer Virtue kept:
All suddenly I saw the Fairy Queen;
Raleigh speaks metaphorically when he refers to "the grave where Laura lay." He is alluding to over three hundred sonnets that Petrarch wrote to a woman...
...[A]fter Petrarch gave up his vocation as a priest, the sight of a woman called "Laura"...awoke in him a lasting passion...
Petrarch would love her for the remainder of his life, noting that she was the only love of his life. In the case of his poetry, Laura was his "muse:"
In my younger days I struggled constantly with an overwhelming but pure love affair – my only one, and I would have struggled with it longer had not premature death...extinguished the cooling flames. I certainly wish I could say that I have always been entirely free from desires of the flesh, but I would be lying if I did.
(So in a sense, Petrarch was praising Laura, as Raleigh does here for Spenser—for different reasons.)
Raleigh writes of the death of the Petrarchan sonnet form of poetry. For many years, Raleigh believed Petrarch's work "cornered the market" of poetry. However, Spenser's work, he insists, far surpasses Petrarch's. Spenser's work is so fine Petrarch's work is forever overshadowed.
At whose approach the soul of Petrarch wept,
And, from thenceforth, those Graces were not seen:
For they this queen attended; in whose stead
Oblivion laid him down on Laura’s hearse:
Hereat the hardest stones were seen to bleed,
And groans of buried ghosts the heavens did pierce:
Where Homer’s spright did tremble all for grief,
And cursed the access of that celestial thief!
The sonnet notes that The Faerie Queene was so magnificent, that the "soul of Petrarch wept." The "Graces" (Love and Virtue) no longer aligned themselves with Petrarch, but came to rest on Spenser's work. The spirit of his poetry rests with dead Laura. This change in poetry caused (metaphorically) stones to bleed and ghosts to groan. Even Homer's spirit is aggrieved by Spenser's genius—cursing him, "that celestial thief"—who stole the heavenly beauty of poetry to grace his own work.
Thank you very much for the good answer!!