It is not clear where the poet/speaker is as he speaks these lines. The speaker is thinking back to a time when he had to choose between two options. The speaker uses the metaphor of choosing one of two paths in the woods. The metaphor describes two choices so the poet "sees" two directions in which to take his life.
So, the setting contained in the metaphor is in the woods at the spot where one road becomes two roads. The speaker notes that the two roads looked about the same, so there was no way for him to know which would be the better choice: "Though as for that the passing there / Had worn them really about the same."
The speaker then thinks about some time in the future when he will reconsider whether or not he took the best path. The speaker will always wonder about the road he did not take ("The Road Not Taken"). So, he supposes that some time in the future, he will try to convince himself that he took the road less travelled. Since both roads looked the same, he could never really know if he took the road less travelled. But he believes that when he is older, he will feel inclined to believe he took the path that most people would not have taken:
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I--
I took the one less travelled by
And that has made all the difference.
When the poet speaks these lines, he is probably in the middle of his life. The actual geographical location is unknown. The poet thinks back to a point in his past when he made a crucial decision (choosing between two roads or paths in life). Then he supposes how he will reflect on that decision when he is older. The setting of the metaphor is in the forest. We (readers) do not know the actual setting of the poet as he considers this past decision.