woods were a place that concealed the Native Americans who compromised the Puritans' safety.  Puritans had little understanding of the indigenous people's spiritual beliefs and, thus, dismissed them as devil worshipers; as a result, the woods were a place where a Puritan should not stray. To enter the woods was a symbolic act of exploring life outside the orthodoxy of Puritan belief, making it the perfect setting forYoung Goodman Brown to put his faith to the test. 

Salem was a colony set up as a religious utopia for the Puritans. Like its predecessor, Plymouth, Puritans believed that they had built a model "city on a hill," a new Zion that offered a model for other Christians, especially the ones they considered tainted, namely, the Quakers, Anabaptists, Anglicans, and Catholics. In "Young Goodman Brown," Salem represents a stronghold of faith. The fact that the titular character elects to step outside it—and suffers terribly as a result—suggests the intolerance, rigidity, and ultimately unrealistic nature of a religion that demands perfect conduct from its practitioners. 

I would also add that the woods are uncertain, secluded, secretive, and full of different types of things that lead to many possible things occuring there. Hence, his journey into "the woods" also represents a journey into the forces of evil which can be easily described as the woods themselves.

The fact that the story begins and ends in Salem is a symbol of the starting point, and then the endpoint of his life after his "visit" to the woods. Salen is hence the safe haven (which we know its sarcastically put in the story), and the woods are the plunge into sin.

The forest is a perfect setting for the encounter that Young Goodman Brown is to have.  It is symbolic of the complexity of the path that each of us walk in life.  Sometimes life is confusing, dark and scary and we don't know which way to go. 

The path of goodness is not always easy to find, one can get lost very easily in the forest, the trees all look alike.  You can be fooled into following the wrong road and wander off the path that will lead you to safety.  This is all a metaphor for the choices one makes in life.

"In "Young Goodman Brown," Hawthorne presents sin as an inescapable part of human nature. The fact that Goodman Brown only has to make his journey into the evil forest once suggests that the spiritual quest is a ritual all humans must undergo at some point in their lives. Brown, however, proves himself incapable of accepting this part of the human condition and cannot move forward with his life as a result." 

The only way that Brown can get back to his wife, Faith, symbolic for goodness and faith in God, is to make the right choices in the dark forest.  Unfortunately, for Young Goodman Brown, he becomes disillusioned when he sees the face of evil, instead of making his faith stronger, it makes him more of a doubter who lives with feelings of gloom all his life.  He doesn't even trust Faith, his wife.

The story is set partly in Salem, and partly in the wooded wilderness around the town. At first glance, the difference is pretty straightforward: the town is good, the woods are bad. Fortunately, there is a little more to it than that. Hawthorne’s story is about hypocrisy and sin. Goodman Brown has grown up in Salem; he has a natural respect for his elders, including his grandfather and his religious teacher, Goody Cloyse. In town, he sees them as good, upright people. But it is in the woods that he mysteriously meets his grandfather with the serpent staff, and overhears Goody Cloyse, the minister and Deacon Gookin proclaiming the devil and discussing a satanic ritual. And it is in the woods that Brown witnesses this black mass.

So perhaps another way of understanding the town/forest dichotomy has to do with truth. Paradoxically, the town, the place of light and civilization and clearly defined social relations, is shown to be deceptive, while the woods, which are dark and dangerous, are the place where the “true” nature of people is revealed. It’s not clear whether Brown really saw these things or hallucinated them, so the ending of the story is also ambiguous: Brown’s disenchantment with Salem after his revelation in the woods can be understood as a form of moral indignation and superiority, or a kind of madness. In either case, Hawthorne’s story calls into question the “real” nature of the people around us, and the inability of social convention (or our own experience) to reveal the true nature of things.

The setting of Nathaniel Hawthorne's short story "Young Goodman Brown" is set in a village during early American colonial times and in a nearby forest. The village represents safety among a group who values living the commandments from the Bible. In the village, people are expected to act appropriately according to the values which the they all hold as right and true. However, the forest represents the wild away from safety in numbers and values. The forest, especially at night, is dark and shades all who go therein from others seeing their deeds. The forest is mysterious and causes Young Goodman Brown to be curious about what goes on there at night. The setting thus represents not only a village and its forest, but the metaphorical settings for our souls. If one stays within the village then one is secure and safe from the evils that can be found in the forest--or a place of darkness and sin.

We learn that the setting of the story is Salem, Massachusetts: a city known for the infamous witch trails that took place there in 1692, trials that resulted in the executions of nineteen innocent men and women and the deaths of several others who perished in jail or as a result of their imprisonment. It is one of the darkest chapters in American history because people turned on their neighbors and friends, accusing them of witchcraft without evidence, the result of hysteria and fear and, perhaps, greed and malice. Rather than just a few people being guilty of wrongdoing, it turns out that a great many people were actually sinful and dishonest. The people in Goodman Brown's community have the appearance of being morally upstanding and righteous individuals, but they are really harboring sinful natures. Even the most upright people are actually working for the devil. This certainly helps to convey that theme that, no matter how sinless we may appear, we are all secretly sinful. Many of the characters share names of real-life Salemites, including Goody Cloyse and Deacon Gookin. This also helps the characters to seem more realistic.

In Nathaniel Hawthorne’s short story “Young Goodman Brown,” setting is relevant to character and theme in a number of ways, including the following:

• The reference to “sunset” in the opening sentence of the story is an example of foreshadowing.  Brown is about to enter a period of his life that will be both literally and figuratively darker than his past.
• The opening sentence also refers to “Salem village” – the community from which Brown will later feel cut off as a result of his experiences in the forest.
• Brown’s journey into the forest is a journey into both literal and symbolic darkness – darkness that is both moral and psychological.
• Brown worries that there “may be a devilish Indian behind every tree” in the forest – not stopping to consider the possibility that evil impulses may reside within his own soul.
• At one point, the mysterious stranger whom Brown meets in the forest says of Brown’s father and grandfather,

They were my good friends, both; and many a pleasant walk have we had along this path, and returned merrily after midnight.

The “path” mentioned here is not only the literal path through the forest but the metaphorical path of life itself.

• Later, in the midst of the dark forest, Brown perceives flames rising from a rock that seems to be serving as a kind of altar or pulpit.  The narrator then notes:

As the red light arose and fell, a numerous congregation alternately shone forth, then disappeared in shadow, and again grew, as it were, out of the darkness, peopling the heart of the solitary woods at once.

Brown perceives this setting as a kind of symbolic parody of the church and church services he is accustomed to attending in the village. He begins to believe that all the other residents of his town are evil. In one sense, he is right: standard Christian doctrine teaches that all people are innately corrupted by sin.  Brown, however, now sees figurative darkness everywhere, and presumes to judge it, especially after he returns to the literal and figurative light of the village. In a metaphorical sense, however, he thus never really returns from his journey into the darkness. The rest of his life is darkened by his dark perceptions of everyone else around him, including his wife, Faith. Little wonder, then, that the story ends literally in a graveyard, symbolic of the death of Brown’s figurative and spiritual death:

they carved no hopeful verse upon his tombstone, for his dying hour was gloom.

Hawthorne purposely sets “Young Goodman Brown” in the middle of a dark Salem forest at night. This setting is used in order to underscore the characters’ descent into evil and to expose the theocratic community’s hidden nature.

Puritans were known for their strict adherence to the Bible. They did not condone leisurely activities, especially if they took place in the forest. Most avoided the forest as they feared it was the lair of the devil. Therefore, Goodman Brown’s trip into the forest is immediately a sin to be condemned. A strict Puritan would have no reason to enter the darkness—unless he intended to sin.

Because Goodman Brown meets many of the townspeople there, it is clear that Hawthorne is illustrating the darkness that exists within everyone; all people in the community are sinning, as represented by their presence in the forest. Outwardly they pray and declare their strict allegiance to God. In truth, they are the very sinners they themselves condemn. No one is exempt from this hypocrisy, even the title character's wife Faith, whom Goodman Brown believes to be pure and good. Her name suggests her adherence to religion, but she too falls prey to the temptations of the forest.

In the course of the story, the narrator remarks that “the fiend in his own shape is less hideous than when he rages in the breast of man.” By seeing the devil in his community members, who he thought to be holy, Goodman Brown is truly shattered. A truly holy community would avoid the darkness, but the people seem to embrace it. Thus, setting illuminates character and theme.

The author Nathaniel Hawthorne probably chose the forest for its visual effect and its aura of as-yet untamed wildness. The forest is the opposite of civilization. It is very old and full of wild creatures, including, perhaps, wild Indians. It is a place where people would naturally go to become wild creatures themselves. It is a place where they can hide from their town neighbors and do anything they want. They can make as much noise as they want without being heard by anyone of importance.

Many contemporary people like to go to the national parks in order to get away from civilization for a while and live more primitive-type lives close to nature. There is something very exhilarating about being among the fragrant pine needles and tall trunks. We can all respond to Hawthorne's description of the mysterious forest, although we do not necessarily want to indulge in devil-worshiping orgies. Most of us would like to escape from civilization for a while and enjoy simpler lives.

We can understand why both Young Goodman Brown and his sweet little wife, whose name is Faith, might get tired of being so righteous and inhibited all the time and might feel an impulse to go a little bit wild on occasion. The same would be true of their neighbors, one of whom is named Goody Cloyse. They are all living under a spotlight, so to speak. They have to be prim and proper all the time. They all have their secrets, as is revealed in the ceremony in the forest.

This night it shall be granted you to know their secret deeds: how hoary-bearded elders of the church have whispered wanton words to the young maids of their households; how many a woman, eager for widows' weeds, has given her husband a drink at bedtime and let him sleep his last sleep in her bosom; how beardless youths have made haste to inherit their fathers' wealth; and how fair damsels—blush not, sweet ones—have dug little graves in the garden, and bidden me, the sole guest to an infant's funeral.

By digging "little graves in the garden," the speaker, who is presumably the devil himself, means that some unwed girls secretly gave birth to babies and killed them at birth and buried them in unmarked graves in their gardens. 

Young Goodman Brown and his wife and all their neighbors live in a very small, constricted world. The forest is the only place where they can congregate for any sinful purposes. In Hawthorne's novel The Scarlet Letter, it is in the forest that the Reverend Arthur Dimmesdale has his secret meetings with Hester Prynne, the mother of his child. And no doubt it was in the forest where they conceived the little girl named Pearl. The early American settlers were surrounded by forests, and they may have felt the trees beckoning to them mysteriously. 

Robert Frost speaks of the mysterious attraction of dark, whispering trees in his poem "Stopping By Woods on a Snowy Evening." 

The woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.

The setting was important in two related ways. First, for the Christian colonists of Brown's period, the forest was the site of Indian activities, and that meant demonic/satanic activities. It was evil, looming right near by.

Second, the path which he walks is a long standing metaphor for life in Western literature (and other literatures, actually). Much like Dante at the start of The Divine Comedy, Brown walks alone through a dark forest, trying to find his "path" just as he is trying to find his literal path.