Iceland's first inhabitants were Irish monks, who regarded the island as a sort of hermitage until the early 9th century. They were followed by Iceland's first permanent settlers who came from Norway. This was the Age of Settlement, traditionally defined as the period between 870 and 930, when political strife on the Scandinavian mainland caused many to flee.

After escaping political strife in Scandinavia, Iceland's settlers were in no mood for a monarchy and opted instead for a parliamentary system of government. A district assembly and Althing (National Assembly) were founded, and a code of law prepared. Iceland became a Christian country in 999, which engendered some semblance of national unity at a time when squabbles were arising among its leaders and allegiances were being questioned. The country flourished during the next century, and established a thriving agrarian economy with little unrest.

Iceland then became a launching pad for explorations of the North Atlantic: Eric the Red, who grew up in Iceland as the son of a Norwegian exile, colonised Greenland in 982; and Eric's Icelandic son, Leif Eriksson, is popularly held to be the first European to explore the coast of North America - which he named Vinland the Good. One of the more reliable Icelandic sagas, however, suggests that Leif Eriksson learned of Vinland from another Icelander, Bjarni Herjolfsson, who had sighted it some 14 years earlier. Whatever the truth is, these voyages of exploration became the source material of one of Europe's great literary flowerings.

The first literary tradition to emerge was poetry, which tended to be heroic in theme. Poetry was displaced during the Saga Age of the late 12th to late 13th centuries, when epic and dramatic tales of early settlement, romance, dispute and the development of Iceland were recorded. These provided both a sense of cultural heritage for Icelandic commoners and entertaining yarns on bitterly cold winter nights.

By the early 13th century, the enlightened period of peace that had lasted 200 years came to an end. The country entered the infamous Sturlung Age, a turbulent era of political treachery and violence. The opportunistic Norwegian King Hákon Hákonarson promptly stepped in, and Iceland became a Norwegian province to be plundered mercilessly. To add insult to injury, the volcano Mt Hekla erupted in 1300, 1341 and 1389, causing widespread death and destruction. Recurring epidemics also plagued the country, and the Black Death that struck Norway in 1349 effectively cut off trade and supplies.

At the end of the 14th century, Iceland was brought under Danish rule. Disputes between church and state resulted in the Reformation of 1550, and the imposing of Lutheranism as the country's religious doctrine. Throughout the next two centuries, Iceland was crippled by rampant Danish profiteering, beset by international pirates and subject to an increasing number of natural disasters.

Denmark's grip on Iceland was broken in 1874 when Iceland drafted a constitution and was permitted to handle its own domestic matters. Iceland was released from Danish rule in 1918, making it an independent state within the Kingdom of Denmark, with Copenhagen retaining responsibility for defence and foreign affairs. However, in 1940, Denmark was occupied by Germany. Iceland realised that the Kingdom was in no position to continue overseeing its affairs and, a year later, requested independence. It was granted on 17 June 1944.

After the occupation of Denmark and Iceland's declaration of sovereignty, the island's vulnerability became a matter of concern for the Allied powers. In response, British and US troops were moved in. The Americans still remain, much to the chagrin of a growing number of Icelanders who want them out. The Brits incurred Icelandic wrath when they refused to recognise Iceland's expanded territorial fishing rights in the 1970s. For a few years, stoushes between Icelandic gunships and British warships during the so-called Cod Wars became a regular feature of the fishing season.

In recent years, Iceland's economy has looked shaky: fishing quotas have been cut back, unemployment has risen and the króna devalued. Clashes between environmental organisations and the Icelandic whaling industry, which split from the International Whaling Commission in 1992, also haven't helped matters. In 2000, hoping to reverse the economic downturn, the government approved an unprecedented deal with the corporation deCODE Genetics, alowing it to database detailed genetic information and eventually the DNA coding of all 270,000 Icelanders. This relatively homogenous gene pool of blue-eyed, blonde descendants of a few Viking colonists promises to provide insight into genetic diseases as well as a steady income for the country; hundreds of millions of US dollars are already rolling in.

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