The world seemed huge to the Israelites, but compared to what we know now, their world was actually pretty tiny. To put it in perspective, Biblical writers thought that Lebanon, which was a few hundred miles north of central Israel—the distance between Washington, D.C. and Philly—was far off. Basically, the scale of everything was much smaller.
Israel had a varied landscape, with mountains, deserts, and valleys, and the Psalms, with their abundance of natural imagery, don't leave that out (107:4, 83:6-11).
Can we identify these locations? Well, scholars have tried to place the names of Biblical cities (see 60:6-12), but pinning them down is often difficult. Even the Jerusalem of today is about 15 feet higher than the ancient Jerusalem because of the buildup over the millennia. Thanks a lot, time.
Speaking of which, time is no easy topic in Psalms either. The Psalms were all written down over a period of about six hundred years, from about three thousand years ago to circa 570 BCE. Imagine if it took J.K. Rowling that long to get each Harry Potter story out.
But it's a bit trickier than that. Because they're all songs, it's possible that some psalms were in the culture long before they were written down. Before writing was common, people transmitted their stories through singing and reciting stuff together around fires at night. No s'mores included.
When it comes to the Bible, we can never be sure how old a myth is unless we have a similar story somewhere else in the regional literature. We can only know when the myth or hymn was codified into the poem. And then, of course, that poem may not have been added to the collection until hundreds of years later.
The writers didn't bother to date their work, but it is possible to tell when a particular psalm was written based on the political events referenced in the texts. If the poem references Jerusalem as conquered, which happened in 586 BCE (see Psalm 79), we know it was written after that.
Who are these folks living in Israel? Well, for the most part, shepherds.
Shepherding was one of the biggest professions in Biblical times. Because the city was a new phenomenon, farming and ranching are still around. The shepherd is the cultural bedrock of the Israelites, and it's no surprise that it figures prominently in the most well-known psalms (23, anyone?).