Contrary to what we've been led to believe, the story takes place in the present day. The Village was established inside of a wildlife preserve to provide a "safe" society, away from the violence of the modern world. The "creatures in the woods" are a fabrication by the Elders designed to keep the younger generation from leaving and/or learning the truth. When Noah Percy (Adrien Brody) jealously stabs Lucius Hunt (Joaquin Phoenix), Ivy Walker (Bryce Dallas Howard) is told the secret of the creatures, and permitted to go to "the towns" for medicine. She retrieves the proper materials from a Park Ranger, but never learns the whole truth of her situation because she's blind. In another example of stunningly-poor movie character logic, the Elders decide to keep the Village running as-is, in spite of the fact that their primary thesis (that senseless violence can be prevented through isolation from contemporary American culture) has been proven to be false.
Thanks, Jeff J, Filmcritic87, Kyle P, Brandon R, Tuxxer, Mcanna, Raimondo, Bridgette G, Nicatron, Shannon M, Alex H, ucladavy, Vigz, Chris W, Silvermarc, Macneil S, and Dylan S, most of whom felt compelled to submit this pooper on opening night.