The splendour falls on castle walls And snowy summits old in story (1-2)
The brilliant light of the setting sun ("splendour") falls against the walls of a castle. Shiny! We don't know what castle, exactly, but it almost doesn't matter: it's a castle among mountains that are "old in story," or famous in old tales.
The long light shakes across the lakes, And the wild cataract leaps in glory. (3-4)
The word "glory" goes well with the word "splendour" from line 1—both describe brilliant, bright light, but both also suggest something almost divine. "Glory," after all, is another word for a halo. Is the speaker suggesting that there is something divine or sacred in nature?
O sweet and far from cliff and scar The horns of Elfland faintly blowing! (9-10)
The echoes of the horn make the speaker think of extreme distance—both spatial and historical. He imagines that the horn is actually originating in "Elfland," and not in the real world at all. Somehow, the sound of the horn is traveling across time and across worlds. It makes sense that this amazing, almost divine view of nature should make the speaker think of "Elfland," since, according to Anglo-Saxon mythology, the elves and fairies were very in tune with nature (like the elves of Tolkien's Middle Earth in The Lord of the Rings—Tolkien was familiar with the same Anglo-Saxon myths that Tennyson was!).