The "working set" is short hand for "parts of memory that the current algorithm is using" and is determined by which parts of memory the CPU just happens to access. It is totally automatic to you. If you are processing an array and storing the results in a table, the array and the table are your working set.
This is discussed because the CPU will automatically store accessed memory in cache, close to the processor. The working set is a nice way to describe the memory you want stored. If it is small enough, it can all fit in the cache and your algorithm will run very fast. On the OS level, the kernel has to tell the CPU where to find the physical memory your application is using (resolving virtual addresses) every time you access a new page (typically 4k in size) so also you want to avoid that hit as much as possible.
