generations of readers have understood Frost's diverging roads as ametaphor celebrating the importance of following one's own heart when it comes time to make choices in life. 

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.

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 connotative setting of the poem revolves around the concept of choice.  The poem is about the choices we make and the identity that is formed as a result of the choice.  The speaker of the poem feels that his choice of which road to take is symbolic of his commitments, his ideals, and his understanding of self.  The connotation is that through this situation of having to pick one of two paths when confronted with a fork in the road, the speaker reveals to us that the people we are and the identities that are formed are only done so when we become the active agents of our own narratives.  This becomes the symbolism, connotation of the poem.  The final component here is the absolute nature of these choices.  It should not be lost that the speaker of the poem affirms these choices when saying, "And that has made all the difference," almost confirming that our choices are the defining characteristic in who we are and who we hope to be.

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!

The poem, "The Road Not Taken" was first published in 1916 in Robert Frost's book "Mountain Interval". The internal evidence in the poem seems to suggest that the seemingly casual and inconsequential choice he is forced to make in the poem is really likely to have been crucial—one of the choices of life that involve commitment or lead to the necessity of other choices that will divert the traveler forever from his original destination. His choice, in any event, “has made all the difference.”

Since that decision "has made all the difference", enough time seems to have elapsed for Frost to see the consequences of his choise.Thus, it seems to involve a choice that was made several years earlier, perhaps even when he was a young man. That period of time could be as early as 1892 when Frost graduated from high school as class poet and valedictorian or as late as 1915, a few years before the poem was published. Most likely, as with many poets, Frost started to write the poem and then took quite a bit of time polishing and refining it.

"The Road Not Taken" by Robert Frost is set in autumn. We know this because the roads are described as covered in fallen leaves. Also, in autumn, when leaves fall and people step on them, especially when they are damp or covered with frost, the leaves turn black. This indicates that the time is late autumn after the first frost in a somewhat damp climate (i.e. not in a desert).

The term "yellow wood" implies that the roads run through a forest where the leaves turn yellow in the autumn. Among the trees that typically turn yellow in autumn are beeches, birches, cottonwoods and hickory. 

As the majority of Frost's poems are set in New England where he lived, one can assume that the setting is a forest in New England, probably filled with beech and birch trees whose leaves have turned yellow and begun to fall, and that the poet is walking along dirt or gravel back roads. 

The poem is about a guy in the woods, and he comes across a fork in the road.  

Two roads diverged in a yellow wood...

One of the roads is more well traveled than the other, and the narrator decides to take the road that is less well traveled.  If you have ever been on a hike through some forested area, I'm sure that you have seen many trails that are exactly like what the narrator describes.  Both trails have their pros and cons.  You have to pick one, and you know that you are not likely to get to come back and choose the other trail.  It's a common occurrence.  

The location doesn't take on any kind of special significance until you "English teacher it."  The fork in the road is a metaphor for any "crossroads of life" that a person has.  At some point in a person's life there is going to be a decision (or many decisions) to be made between two equally appealing choices.  One has to be chosen knowing that the other choice will cease to be an option after the decision is made.

 The poem says that choosing the less traveled road has made all of the difference. That's an important detail to notice.  Actually, it's the lack of detail that is important to notice. The narrator doesn't say whether or not the choice made a good or bad difference.  It's the same thing with life decisions.  Sometimes a single decision will have far reaching and vast repercussions (good and bad).  Well, of course that choice has made all of the difference then.