The literal setting is in a simple room with a woman ironing. This act sets the mood of helplessness. No matter how many times a person irons an article of clothing, the next time it is washed and run through the wringer, it will be wrinkled. Ironing is a never-ending task.
The psychological setting is in the narrator's mind. She is agonizing over the countless mistakes she has made in rearing her daughter, Emily. She sees the many times she has struggled to straighten out (iron) her life. She also sees the hopelessness of trying to shape another individual, and even the difficulty in shaping oneself. Her final hope is that her daughter will find her own strength and not feel the helplessness that the narrator feels. She hope that she will discover that she is not destined for conformity and that she will have the strength to accept her "wrinkles" and even see the beauty in them.