Lord Rama and his army of apes and other creatures attempt to cross the sea to reach Lanka - the domain of Ravana - to rescue the abducted Sita. To do so a bridge of pebbles and stones is built by squirrels, and Sita is rescued.
Interestingly this was the beginning of the era of the talkies, and Phalke was unaware that Alam Ara the first talkie was being made. Originally shot as a silent film and post-synchronised with sound, Setu Bandhan is a metaphor for the bridge between the silent and the talkie era.