The "yellow wood" could simply be a reflection of Frost's love of nature. He frequently set his poems in natural settings; this could simply be the story of a trip through a wooded area where the trees obscured the view of the road ahead.
Based on the context of the rest of the poem, however, it seems more likely that the "yellow wood" is symbolic of a decision point in the narrator's life. The speaker needs to make a choice about a course of action or a direction to follow, moving forward with his/her life. "Two roads diverged in a yellow wood, And sorry I could not travel both."
Faced with this need to make a decision, the narrator first wishes to avoid being forced to commit to either option. The traveler studies both parts of the fork, noting the leaves and the grass and the wear each had experienced from previous travelers. The speaker is trying to find out what has happened to others who have chosen one or the other of the possibilities being presented, trying to figure out what would be the consequences of choosing one path over the other.
Finally, the narrator makes his/her choice. There is some regret at not being able to explore both options, but the speaker chooses the less common option. "Two roads diverged in a wood, and I,
I took the one less traveled by" and, having made the decision, continues on down the path of life.
Interestingly, one of Shakespeare's most famous sonnets, #73, begins with the following lines:
That time of year thou mayst in me behold
When yellow leaves, or none, or few, do hang
Upon those boughs which shake against the cold,
Bare ruin'd choirs, where late the sweet birds sang.
Shakespeare is painting a picture of late fall or early winter, and it may be that Frost's "yellow wood" is an allusion to this sonnet. At any rate, it would seem that Frost is using yellow leaves for the same purpose, to symbolize a late period in life.
It should also be noted that the speaker, undoubtedly Frost himself, is not approaching these yellow woods but is inside them.
Two roads diverged in a yellow wood . . .
He is surrounded by trees as if in a maze. He not only can't see where the roads lead, but he can't even tell where he is. And it is gettiing late. He has to make a decision without having any information to go on.