The setting of Alfred, Lord Tennyson's poem "The Lady of Shalott" is the imaginary kingdom of Camelot, of which King Arthur is the legendary ruler.
The lady's specific location, however, is the isle of Shallot, which is separate from the Kingdom of Camelot by a river. The lady lives in isolation in a tall tower located in the island. Her location is specific enough to prevent her to look directly at the kingdom of Camelot for fear of a curse.
For a modern comparison, "The Lady of Shalott" shows the idyllic type of setting that is replicated in fairy tales: The river running through, a castle in the distance, the peasantry living together in small cottages, a tower that can be seen from far away with a mystery guest inside of it, and the entrance of a hero to recover a damsel in distress.
In the case of "The Lady of Shalott" it is the lady who is the sequestered guest of the tower waiting for Sir Lancelot to make his rescue. All that the townsfolk can hear coming from the tower is her singing. During the day, she stitches a tapestry of the outside world. She hears barely from it, but she does know that the town has continued life as usual although she is not a part of it.
Conclusively, "The Lady of Shalott" shows a utopic and idyllic setting that combines medieval chivalry with bucolic imagery, nostalgia, isolation, and the traditional mysteries of the townsfolk.