Medieval England 932 AD…or the 1350s...or the Present Day?
In the 1350s, people were telling stories that took place at the turn of the millennium. So while the movie may tell us that it takes place in 932, the production design looks more akin to sometime around the middle of the 14th century.
The filming took place largely in Scotland, but unfortunately many of the castles Monty Python had planned to film at were unavailable at the last minute. Luckily, they found the privately owned Doune Castle, which is responsible for almost all of the castle shots. Filmed cleverly from different sides and angles, it's a stand-in for all of the castles.
Fun fact: the original screenplay was set half in the Middle Ages and half in the modern world. Supposedly, the knights actually did find the Holy Grail in this version and it was located in none other than Harrods (a famous department store in London) because Harrods has everything.
However, as the script was refined it was determined that a solely medieval setting would be best (maybe for budget-related reasons) and that's why we have the tale of Arthur as it occurs: in Monty Python's own wacked-out version of medieval England. That doesn't stop modern day police officers from showing up at the end of the film and arresting everyone though.