Historical context refers to the combination of cultural, sociological, economic and many other factors that surround the conditions in which a piece of literature takes place or the moment it's produced. Understanding all these elements whenever we analyse any story, will help us to interpret the facts way more thoroughly.
For example, when reading about Columbus' trip diaries from his voyage around the world we may find ourselves asking why he decided to carry on such a difficult task. Understanding historical context, will provide a proper answer: Spain needed new routes for trading across India. Knowing the political and economic conditions of Spain at the time, would be crucial in order to better understand the cause-and-effect relations of the events in this story.
Hope this helps!