This song is taught to Link by Saria (obviously) in the Sacred Forest Meadow. Link needs to learn the song and play it to Darunia in Goron City in order to obtain the Goron's Bracelet and proceed into the next dungeon (the Dodongo's Cavern).
Saria's Song can be heard throughout the Lost Woods and is used to guide Link through. It can also be used to speak to Saria at most points in the game to ask for advice. Most of the advice that she offers is pretty useless.