When the difficulty changes how is it set?
There can't be some kind of signal dispersed around the network, saying "difficulty change ... ...NOW!", can there?
Yes, there is.
When a block is solved, that block is relayed throughout the network. The difficulty is recalculated every 2016 blocks. So each node knows it needs to recalculate the difficulty it's using before it starts working on its next block whenever its blockchain increases in length by another 2016 blocks. Each node calculates the difficulty for itself, and they all use the same rules for that calculation so that they end up with the same difficulty.