We are, literally, in Wonderland for this poem.
What does that mean for you the reader? Well, it means that we're nowhere real, which is both exhilarating and a little frightening. On the one hand, anything is possible, but on the other, anything is possible. The author has complete control over what happens because he made up even the landscape. That can be a little creepy.
With that in mind, our setting in this poem is nearly unfathomable. We're in a strange wood at first, with strange creatures and plants whose physical forms are left nearly entirely to our imagination. Then, we move on to a more domestic scene, where a father is giving advice to his son. For the climactic moments of the poem, the hero moves back out into the woods, deeper and darker this time, and comes face-to-face with his nemesis.
After the battle, towards the end, we return to the domestic, in a scene of celebration, and then finally we return to where we came from, with the same strange pastoral that has been forever altered (though the poem doesn't come out and say it) by the battle between good and evil. How has it changed? That's up for you to decide.