Four levels of interpretation (adapted from the Holman Handbook):
1. Literal (historical)-what story actually says 
2. Typological (allegorical)-illustrates truths 
3. Moral (tropological)-conversion of soul, what should be done 
4. Anagogical (eschatological)-deals with mystical or spiritual meaning

The key to understanding Book I, Canto 1, is to recognize that it is part of a larger work that has a very involved allegorical structure.  Edmund Spenser's The Faerie Queene is the longest narrative poem in the English language--and he left it unfinished. Each book of The Faerie Queene focuses on the adventures of a particular knight; that knight represents a particular virtue.  In the case of Book I, the Red Cross Knight represents the virtue of Holiness. If you were to read all of Book I, you would discover that our hero goes through many trials before he finally wins his battle against a dragon that has been ravaging Una's homeland and wins Una's hand.

In Book I, Canto 1, we are introduced to the hero.  Look for the description of the way he looks in the first stanza. Also look carefully at the description of Una in stanza 4. We are joining these two characters just after they set off on their quest to find the dragon.  

On their way, they will meet obstacles.  The first obstacle appears in stanzas 12 and 13.  Look very carefully at the description that starts in stanza 14, and spend some time (preferably not at mealtime) visualizing the encounter between the Red Cross Knight and his first opponent.

The second opponent won't be quite so obvious.  He appears in stanza 29, and you won't even know his name for quite a while.  One key to understanding the danger posed by this character is to know that Spenser's England was profoundly prejudiced against Catholicism--so look for the clues that this character is associated with the Catholics.

The complete text of The Faerie Queene