The extract comes from Dubliners, a collection of stories published by James Joyce in 1914.
The location of the action is, as in all the stories told in the book, Dublin. The city is described in the whole collection in minute detail, so that Dublin itself is almost a character.
The protagonist of the story, Eveline, is sitting near a window of her house. She watches the streets just outside: it's evening, and she can hear the footsteps of a man clacking on the pavement and crunching on the ashes before the new houses. Such houses make Eveline reflect about her youth, when she used to play with other children in the field where the blocks now lay.

From such description, the city seems calm and comfortable. Eveline knows it well and her memories are linked to it, just as her whole life and youth.
So Dublin is not only the setting of the scene, but also a part of the character's life. That's what prevents Eveline to move away from it. That's the reason of her paralysis, her inability to leave the city, her past, to move into a totally new world and life.

The present short story is told from two different points of view:
 Narrator's point of view: where the simple past is used
 Eveline's internal point of view: where the syntactic structures: used to, past perfect, costruction of would to or was going to do are used.

The setting is essential because it contributes to the mood of narrative. In the short story the intelligent reader can distinguish:
 An external setting which is frightening and unacceptable
 An internal setting: Eveline's poverty
 A mental setting: Eveline's objects of remembrance