Found this online hope it helps.
Just copied and pasted this from else where.
What kind of mobile phone system is there in Iceland?
There are two GSM operators in Iceland:Iceland Telecom and Vodafone. Together they cover most of Iceland including all towns and villages with over 200 inhabitants. Both companies sell SIM cards for pre-paid GSM/GPRS services. Pre-paid refill (top-up) cards are available at petrol stations around the country.
Please note: Iceland's mobile phone system operates on the 900/1800 MHz frequencies. Some phones from North America (and parts of South America) may not work on this system as they operate on the 850/1900 MHz frequencies. However, a quad-band phone (850/900 /1800 /1900 MHz) will work.
Iceland Telecom’s NMT long-range mobile service covers most of Iceland, including the interior highlands, and is suitable for those who plan to travel extensively in remote wilderness areas.
It seems you can buy sim cards on Iceland air flights before you land and at the Elko shop in the duty free area for arriving pasengers. Be sure to get your phone unlocked by your phone company at home. Allow plenty of time for it too. I took 02 here in Ireland over six weeks to get the unlock code for my galaxy S from in 2012. I was back home nearly 2 weeks when i got it.