Just as the poem has two different narratives (see the "Speaker" section for more), it also has two different settings. The first setting is outside the wedding hall. There is no way to know in what year or even century the poem takes place, but it must have been after the Age of Exploration, because the Mariner describes a voyage all the way down to the Arctic. As for the place, we know the Mariner and the Wedding Guest come from somewhere in the British Isles, but not exactly where. Judging by the use of the Scottish word "kirk," and the fact that ballads were popular in Scotland, this poem could be set in that region.
The wedding, quite frankly, sounds like a rockin' time. There's singing, dancing, drinking, and a whole lot of merry-making. But we only hear all this revelry behind closed doors. The Wedding Guest is sitting on a rock outside the feast, and maybe he catches a glimpse or two of the party when people enter or leave. But that's it. Otherwise he's just sitting in the darkness listening to a grizzled old man with magnetic eyes.
The setting of the Mariner's story, on the other hand, is full of spectacular scenery and supernatural elements. Special emphasis is put on the weather and on astrological phenomena like the sun, moon, and stars. These are obviously things of great concern for sailors. The story begins in the bay with the receding shoreline. The boat travels down to the equator and then to the Arctic Ocean, where they run into trouble in an ice field. The ice is cracking and groaning all around them.
Then the albatross comes, accompanied by a strange mist, to lead them out of the ice. After the albatross is killed, the setting shifts in the direction of the supernatural. The wind disappears, and the ocean is eerily calm and glassy. The sails go slack. Meanwhile, the sun turns red, the water changes color, and strange slippery creatures and sea-snakes come out. At night, these creatures glow on the water with phosphorescent effects. This section of the poem is characterized by extreme dryness, which we see in the drying of the sails and the appearance of the skeleton-like Ghost Ship. The ocean is like a brackish swamp.
And what about that ocean? The Rime of the Ancient Mariner is set in a time when, once you crossed a certain point in your ship, you could expect not to see other people for a long, long time. As in many works of literature, like Herman Melville's Moby-Dick, the ocean represents the mysteries of the human soul and, if you want to get all Sigmund Freud about it, the unconscious. Just like the sea, an individual's personality is often like a flat, uniform surface that conceals a deepness filled with those bizarre and often unsightly creatures we call emotions or desires. So, when the Mariner pollutes his soul by killing the albatross, it's not a surprise to see that the ocean becomes polluted with slime and horrible creatures. Moreover, the imagery of the vast, vacant ocean, particularly once the rest of the crew has died, expresses a condition of spiritual solitude and loneliness. It's the kind of setting that makes you realize we're truly all alone in this world, with seemingly infinite depths above and below us.
After the Mariner breaks the curse against him, the strange colors on the ocean disappear, but then a bunch of angels turn the poem into a zombie movie, amid a crazy night-time light show with lightning and the Aurora, taking over the bodies of the sailors. They create their own strange colors and beautiful song-like sounds. The ship retraces its steps, moving back to the equator, and then, with the return of the wind, to the bay where the story started. At this point, the story-within-a-story ends, and we return to the scene of the wedding feast. Taken as a whole, the setting traces an arc from the wedding to Antarctica and back again.