Where and when is the play Macbeth set, and were the characters real people?

Shakespeare's Macbeth is a stark reminder how illusions of grandeur and a false sense of security, can shake even the most solid foundations, such as the marriage between Macbeth and Lady Macbeth, a marriage so destructive from both sides that disaster is assured. Macbeth recognizes his own dark and "horrible imaginings," (I.iii.138) and Lady Macbeth wishes to be "top-full Of direst cruelty," (I.iv.40) in ensuring that their ambitions are realized. Shakespeare makes full use of his poetic licence in creating the setting for Macbeth and  his characters are dramatic, contradictory in nature and easily manipulated or manipulating.

He bases his characters on real-life Scottish royalty, about whom he has read in the Holingshead Chronicles, the respected source of information in its day. Shakespeare then and mixes this reality with a sharp dose of imagination, setting out to teach his audience a stark lesson on the devastating effects of "vaulting ambition," (I.vii.27) and to suit the theatrical environment.

There was indeed a real Macbeth (and Lady Macbeth), who ruled Scotland in the eleventh century, after defeating Duncan in battle. Already there are differences in the plot as Shakespeare's Macbeth kills Duncan through dishonorable means, while he sleeps. In fact, Macbeth "does murder sleep," (II.ii.37). On the battlefield, however, the real Macbeth would have been a hero, destroying the perceived enemy, a vicious and unrelenting king Duncan, not the kind and "meek" Duncan who has been "so clear in his great office," ((I.vii.17) in Shakespeare's play.

Shakespeare would also have been very aware of his allegiance to King James I of England, previously king of Scotland, apparently descended from the Scottish kings, in particular Banquo's line, and so would not have wanted to create an image of an evil king, except Macbeth, and risk upsetting his most honored audience member and, indeed, Elizabethan society.