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What does the quote from Paradise Lost, Book I mean and does it connect to the pastoral theme in Shakespeare's As You Like It?

"The mind is its own place, and in itself / Can make a Heaven of Hell, a Hell of Heaven,"

Quick answer:

This quote can be understood as an expression of Satan's continued defiance of God. Even though he has been cast out of heaven, Satan's imagination is still his own, and through the imagination he will make hell into his own version of heaven. The idea of one group being cast out by another and creating a new world is also present in As You Like It.

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The quotation can be understood in several ways. It can be read as an expression of Satan's defiance of God, of a piece with his famous declaration that it is "better to rule in hell / than serve in heaven." That is, even though he and his followers have been cast out of heaven, Satan will continue to resist God's authority.

It can also be read as an affirmation of the power of imagination. Satan declares that his mind can make hell into a heaven, meaning that it's how one thinks about a place that counts, even though that place is so different from heaven. Satan is saying that even though he is in hell, he will make it into his own version of heaven.

Finally, it can be read as Satan's insistence on his independence from God. Even though God has defeated Satan and banished him to hell, Satan's individuality endures—he retains authority over his own mentality, and suggests that that, in itself, is a kind of victory over God.

As You Like It shares with Milton's poem the notion of one group being cast out by another. In the case of the play, the usurping Duke Frederick banishes his brother Senior and Rosalind to the Forest of Arden. This is an inversion of sorts of what happens in Paradise Lost, if we understand Frederick to be a stand in for Satan—in the play, Satan/Frederick succeeds in casting out God/Senior, and it is the banished Duke who turns the wilderness of the forest into a pastoral paradise.

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When meaning is unclear, it is important to analyze a quotation in context with the rest of the text [I've inserted the whole contextual quote above]. You must ask questions like: Who is speaking? What is the subject spoken of? Is there a conflict, a resolution, a conclusion, a need, a paradox stated?

In this quotation, the speaker is Lucifer, or Satan, also called by Milton "the lost Archangel." He and his legions have just fallen from Heaven to the newly made Hell. Lucifer is adjusting his psychological reactions to their new state of being.

"Is this the region, this the soil, the clime,"
Said then the lost Archangel, "this the seat
That we must change for Heaven?—this mournful gloom
For that celestial light? Be it so,..."

He is saying farewell to the joys and happy environs of Heaven and hello to the misery and "horrors" that now surround him. Milton comes close to giving Lucifer a note of remorse or regret at what his rebellion has cost him, though the hint of remorse is immediately thereafter snuffed out, which in itself is an interesting characterization to examine:

'... Farewell, happy fields,
Where joy for ever dwells!
... in my choice,
To reign is worth ambition, though in Hell:'

As said, Lucifer is adjusting his psychological perspective. He bids hello to Hell and bids Hell receive him: "Receive thy new possessor." He says that he brings with him to Hell a mind (here equating himself with God through the attribute of Reason) that is independent of time or place: "not to be changed by place or time." It is now that Lucifer speaks the quote you ask about.

The mind is its own place, and in itself
Can make a Heaven of Hell, a Hell of Heaven.

Lucifer is emphasizing the fact that he believes his mind is sacrosanct, immutable, immortal ("not to be changed") and that even a fall from Heaven will not change his essential attributes. He further asserts a mind over matter philosophy by stating that the mind, independently functioning, has (1) the power to transcend circumstances and lead to a happy life regardless of circumstances as well as (2) the power to descend to horrible circumstances and lead to a life of misery. Lucifer chooses to transcend circumstances of place and ascend to happiness. He later explains he does so because he is still motivated by ambition to reign, to rule as God rules: "To reign is worth ambition, though in Hell."

This idea has some connection to As You Like It in relation to Duke Senior and his followers in pastoral Arden Forest. In keeping with the pastoral theme, Duke Senior explains that the forest treats them kindly, giving them all they need, and treats them honestly, showing them the truth of what they are. This may be analyzed as an instance of Duke Senior and his men using their independent minds to "make a Heaven of Hell" instead of succumbing to descent into adversity and making "a Hell of Heaven."

Are not these woods
More free from peril than the envious court?
The seasons' difference, as the icy fang
And churlish chiding of the winter's wind,
Which, when it bites and blows upon my body,
Even till I shrink with cold, I smile and say
'This is no flattery: these are counsellors
That feelingly persuade me what I am.'
Sweet are the uses of adversity,
Which, ...
Wears yet a precious jewel in his head; 

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