When the interviewer poses this question what they are really trying to find out is what type of environment has an impact on your job performance. They need to know how well you would be able to fit into the position as well as the department in which you would be working. Good managers recognize that the attitudes of a work group or team can have an impact on job performance, so the interviewer is likely also interested in finding out whether you will be able to work well with that team given the prevailing attitudes so they can make the right fit for that position.
Your response to this question should emphasize your ability to function well in a variety of different settings. You should also indicate in your response that you are able to be productive even in situations and environments that are less than ideal. While your response to this question can be specific in terms of the type of environment in which you feel you work best, you also need to be careful to indicate your ability to remain flexible and respond well in a number of different situations.
For example, you might indicate that you enjoy having some time alone in order to get your day planned but that the majority of the time you enjoy being around a lot of activity and receiving feedback. You may give an example that relates to a prior work situation, but once again, make sure that you always indicate your flexibility regardless of the specific type of environment in which you prefer to work.
The main goal of your response to this question should be to indicate that you are easy to work with. Make sure you steer clear of making any type of demands regarding the type of environment in which you need to work in order to be productive, such as uninterrupted work time or private offices or you will run the risk of the interviewer assuming that you may be difficult to work with and satisfy. This is certainly something that you do not want to have happen because if that is the case, the interviewer is likely to choose someone else for the position they feel will be easier to work with, even if that person may not be quite as qualified or as experienced as you.