Woodstock is a song about the well known 60s festival Woodstock , attended by 300.000-400.000 people, including acts like Joan Baez, Sly and the Family Stone and Jimi Hendrix.
Joni Mitchell mainly wrote the song because she was supposed to go to the festival (as it was free of cost), but eventually she did not go, as Mitchell explained in this live performance.
She followed the festival on TV and she later wrote the song from the perspective of someone who went to the festival.

Here is an image of the Woodstock festival.