I think a settlement is quite generic in meaning.

You can think of bygd as a place people live which is similar in terms of number of people as village.

The key difference is how it is arranged. Outside of Norway and Sweden in Europe settlements would cluster together into villages. So you would have the houses put close together and then the farmed fields would encircle the village.

In Norway and Sweden in contrast farms would lie scattered around the landscape like in North America. A bygd is basically a landscape where farms are scattered about that forms a society. People there know each other and have dealigns with each other.

Because Norway and Sweden are quite thinly populated traditionally with a lot of forrests and mountains, these bygd places could be someting like a valley between the mountains with some farms.

The next valley over would constitute the neighouring Bygd. That is why if you meet Swedes or Norwgians you would pretty much never encounter anyone who has a last name based on a profession. In rest of Europe people will have last names like Shoemaker, Baker, Smith, Goldsmith, Carpenter etc. Norwegian last names are typically place names.

This happened because people livedin villages and people would specialized on different professions. In Norway and Sweden since people didi not cluster but lived spread out, there was not much professions like that. A farmer in Scandinavia had to typically do all those tasks themselves. I think that is partly why we are a very do-it-yourself society.

It is not accident that IKEA is Scandinavian and require you to assemble the furniture yourself.