Here's the short version: it's World War I, folks, and we're in the trenches.
But alas, the short version is nothing without the longer version, and when it comes to setting, that's a bit more complicated. In the long version, the battlefield gives way to the home front, with its church bells, candles, windows, and widows. In "Anthem for Doomed Youth," Owen seamlessly blends images from different places to create a general atmosphere of war—both at home and on the front.
The effect is that we can be crouching in a trench one moment, listening to shells being fired, and then standing with a soldier's family at his funeral the next. And, in addition, we can simultaneously hear a prayer and rifle fire (or a choir and artillery shells) blended together in a sort of terrifying medley.
They didn't call World War I The Great War for nothin'. It affected everyone and everything; even the simple act of lowering one's blinds at the end of the day is imbued with the sorrows of warfare.