Why does Gretel initially believe that "out-with" is in the countryside?
In Chapter 4, as Gretel looks out the windows of her new home, she sees no other house. Then, when she sees the concentration camp, Gretel believes it is a summer camp. She explains to Bruno,
"This must be the countryside where all the farmers are and the animals, and they grow all the food. There are huge areas like this where people live and work and send food to feed us." [Ch.4]
Auschwitz, near the village of Birkenau--"Out-with"--is located in Southern Poland, so when Gretel and her family move from Berlin, Germany, they ride the train for some distance, as the train ride even nowadays takes around 10 hours. Since she has come from a large metropolitan area and even left her own country, Gretel naturally thinks that such a barren area as the prison camp is located is in the countryside (actually, it was a former military base).
Probably, too, she has watched miles and miles of countryside after first riding in her parents' car and then having taken the train through Germany and finally into Poland, although she may think she is still in her own country.