Explain the title of The Woodlanders by Thomas Hardy and its relation to where the story takes place.

The action of the novel takes place in the village of Little Hintock, which Hardy's narrator describes as "snipped out of the woodland." In other words, it is, as in a fairytale, surrounded by woods. Because the villagers live so close to the woods, Hardy refers to them as woodlanders (wood dwellers).
The setting is significant because, the narrator asserts, being so isolated in a quiet, out-of-the-way spot with little to do or see that is new, the woodlanders experience heightened passions. The narrator says,

It was one of those sequestered spots outside the gates of the world where may usually be found more meditation than action, and more passivity than meditation . . . [where] dramas of a grandeur and unity truly Sophoclean are enacted in the real, by virtue of the concentrated passions and closely knit interdependence of the lives therein.

What Hardy means by the above quote is that the woodlanders' lives are so closely interconnected that this can raise their seemingly small life events to the level of Greek ("Sophoclean") drama.
Isolation in the woods causes these characters to live more intensely. Woodlander Grace Melbury, for example, will feel very deeply her husband's infidelities, just as the good-hearted Giles suffers very deeply when his beloved Grace is persuaded to marry a higher-class man.