Santiago's father has observed that people from all over the world pass through his village. They come in search of new things, they climb the mountain to see the castle, but when they leave, they're the same people who arrived. They haven't been changed by their experiences of travel at all. In basic terms, they're the same people who live right there in the village.
Santiago himself wants to be a traveler, to see strange, exciting new worlds. Like the travelers who pass through his village, he wants to see castles in the towns that he visits. But unlike them, he doesn't want to stay in the towns he visits forever.
Santiago's father further notes that the travelers who come to the village have a lot of money and can therefore afford to travel. The only people among the villagers who can travel, he ruefully observes, are shepherds. Santiago responds by saying that he will therefore become a shepherd.
This is a crucial moment in the story because it shows that Santiago is ready to become a very different kind of traveler to the ones he sees in the village, a traveler who looks upon travel as a chance to realize his dreams.