The setting is a crossroads in a woods: a place where two roads meet, one going one way, one the other. It appears to be fall, as the wooded area is described as "yellow," probably a reference to the color of the leaves on the trees. The roads seem to be in an isolated spot, as the narrator is all alone, and they seem primitive and unpaved. Frost describes one as "grassy" and said it "wanted wear," meaning that not many people had been walking on it. Because grass is growing on it, we can imagine it as an unpaved footpath. 

Frost explained that the poem was a joke that emerged from his friend Edward Thomas's tendency, when they were walking together, to complain that whatever path they took, they should have taken a different one. 

However, once a poet publishes his poem, the public takes possession of it, and generations of readers have understood Frost's diverging roads as a metaphor celebrating the importance of following one's own heart when it comes time to make choices in life. 

Literally speaking, the setting of the poem is a "yellow wood," where two roads "diverge." This means that the speaker is in the woods in the early fall, when the leaves have turned yellow:

Two roads diverged in a yellow wood...

The speaker is confused which road he should take and tries to look down one as far as he can, but realizes he does not know where each of them leads.

Metaphorically speaking, the setting of the poem is the speaker's mind. The phrase "yellow wood" may imply that he is at his later stage of life. In his mind, the speaker can see two roads, which represent the two options that he has, and he must choose one option. He cannot choose both options simultaneously. This proves to be an agonizing task for the speaker because he does not know where each option would take him:

And both that morning equally lay

In leaves no step had trodden black.

The external setting for Frost's poem, "The Road Not Taken," is a yellow wood. The poet is, literally, gazing upon two paths in this wood: Both paths are grassy and worn... really worn about the same. However, the more complex setting is the internal setting of this poem, the poet's heart and mind. In that setting, the poet is thinking about choosing a path, making a decsion. It is this choice, represented by the path metaphor, that will make all the difference in the poet's life!

Literally speaking, the speaker of the poem is in the woods in which two roads "diverge." The time of the year is autumn because "two roads diverged in a yellow wood." The speaker is confused about which road he should take.

Metaphorically speaking, the speaker could be old (this is symbolized by autumn as it is the season before winter, which is widely regarded as the time of death), and he finds himself at the time when he has to make one important choice in his life. He cannot make two choices simultaneously. Once he makes a decision, he will have to stand by it. So, he embarks on a mental journey.

The poem's title seems to suggest that no matter what journey we embark on, there will always be something to haunt us, like the journeys we missed or the opportunities we did not take.

The poet is walking in a forest, and the time of year is Autumn.

Since the poem was published in 1916 only shortly after Frost left England where he would often take walks with his close friend, Edward Thomas, the forest is probably near Gloucestershire, where Frost owned a cottage. However, since he had already returned to New England at the time of the publication of his poem, Frost could have just as easily used a New Hampshire forest as his setting. The time of the poem is probably between 1912 and 1915 while he was a close with the indecisive and troubled Thomas. For, Frost himself declared that the poem was composed with Thomas in mind. With the description of a "yellow wood," the time of the year would be the fall. 

While a description of the indecisiveness of Edward Thomas may be the objective of the poem, there have been many metaphoric interpretations of this popular verse, especially one that involves faltering at an important time of one's life. This interpretation may still return to Thomas who chose to go to war rather than accompany Frost to New Hampshire. So, just as the speaker of the poem hesitates--

And both that morning equally lay In leaves no step had trodden black. Oh, I kept the first for another day!

Thomas faltered in his friendship, the most important of either man's life, and remained in England, enlisting as a soldier.

The poem begins "Two roads diverged in a yellow wood". This gives a a good deal of the setting right here in the first line. 

First of all, it is in the woods. We are also told that it is "a yellow wood", indicating the time of year to be autumn. We are also told in this opening line that the speaker is traveling on a path. This path leads to a fork, "Two roads diverged". We are also informed, later on in the poem, that it is morning. The speaker states that "both that morning equally lay/ in leaves no step had trodden black". So the woods are not highly used.