Well our speaker is an airman, and he sure talks a lot about the clouds, doesn't he? That's one way to think of this poem's setting: the clouds. Now the speaker isn't exactly flying through the clouds or anything like that. The way he talks about them being "above" makes us think he's still on the ground, maybe standing next to his plane. But he directs our attention upwards, imploring us to imagine him flying through these clouds and eventually dying.
Besides the clouds we mentioned earlier, we are directed to think of another place, too. The setting of the poem is like a montage in that way. Even as he contemplates his death in the clouds, the speaker mentions Kiltartan twice, a scenic place in Ireland that is the speaker's home village. It seems that the memory of the place is the speaker's lone attachment to earth. Clearly, he doesn't expect to be missed back home (as he notes in line 7), and he's likewise not moved by any "public man, nor cheering crowds" (10). This second setting, really, just acts as a means to set off and highlight the speaker's isolation in the original setting: the clouds in the air.
Of course, it's a cliché to say that someone moves in "rarefied air," and there's nothing that gets our goat more than a well-worn cliché, Shmoopers (winky face!). But we have to go with it in this case: the poem's setting is really driving the point home about our speaker, an Irish airman who indeed is in rarefied air.