"The Dolphins" is told from the perspective of dolphins living in captivity. The speaker alternatives between what sounds like the individual voice of one dolphin and a collective voice for all of the dolphins living in this pool.
This voice begins the poem by pointing out that your "world" is the place where you "swim" or "dance." In other words, the environment you're in creates your reality. Notice that the speaker doesn't say "the world," perhaps hinting at the pure, "simple" way that dolphins experience things.
The mention of dancing, meanwhile, implies that these dolphins, like human beings, are capable of joy and play. This makes the following line more devastating, as it reveals that these emotional creatures feel trapped by their captivity. They might be in their "element," but they're "not free."
The word "element" here is a pun: on one level, it refers to the fact that the dolphins are in the water, one of the four classical "elements" of matter (earth, air, water, and fire). But to be "in one's element" also means to be thriving in one's conditions—which is clearly not the case for these dolphins. Their "world" has drastically shrunk now that they're confined to an extremely limited space from which they can't escape. The parallelism of "We are in our element" and "we are not free" underscores the cruel irony of the dolphins' situation: they need water to survive, but the water of this manmade habitat has become their prison.
These lines, like the rest of the poem, are written in free verse. The lack of a regular meter or rhyme scheme makes it sound more like readers are right there with the dolphins in the moment, hearing their deepest, unfiltered thoughts. Note, too, that these opening lines each end with a firm end-stop. The poem immediately sounds straightforward and to the point, as though the dolphins fully understand the dismal reality of their situation.