Iceland was settled in the late 9th and early 10th centuries, principally by people of Norwegian and other Scandinavian origin. In 930, the ruling chiefs established a republican constitution and an assembly called the Althing (locally written Alþingi) --the "oldest parliament in the world". The parliament convened each summer at Þingvellir, where representative chieftains (Goðorðsmenn) amended laws, settled disputes and performed executions. Laws were not written down, but were instead memorized by an elected "lögsögumaður", or Speaker of the law.
Iceland enjoyed a mostly uninterrupted period of growth in its commonwealth years. As is well known, settlements from that era have been found in southwest Greenland and eastern Canada, and one viking saga, "Eiríks saga Rauða" speaks of the settlers' exploits.
The settlers of Iceland were mostly pagans, and worshipped, among others, Óðinn, Þór and Loki. In the year 1000, under pressure from Norwegian king Haraldur, they accepted Christianity, and forbade all pagan practices and rituals.
The Icelandic Commonwealth remained independent until 1262, when it entered into a treaty which established a union with the Norwegian monarchy. It passed to Denmark in the late 14th century when Norway and Denmark were united under the Danish crown.
In the early 19th century, national consciousness revived in Iceland. The Althing had been abolished in 1800 but was reestablished in 1843 as a consultative assembly. In 1874, thousand years after the first acknowledged settlement, Denmark granted Iceland home rule, which again was extended in 1904. The constitution, written in 1874, was revised in 1903, and a minister for Icelandic affairs, residing in Reykjavik, was made responsible to the Althing. The Act of Union, a December 1, 1918 agreement with Denmark, recognized Iceland as a fully sovereign state united with Denmark under a common king. Iceland established its own flag and asked that Denmark represent its foreign affairs and defense interests.
German occupation of Denmark in 1940 severed communications between Iceland and Denmark. In May 1940, British military forces occupied Iceland. In July 1941, responsibility for Iceland's defense passed to the United States under a U.S. - Icelandic defense agreement. Following a plebiscite, Iceland formally became an independent republic on June 17, 1944.
In October 1946, the Icelandic and U.S. Governments agreed to terminate U.S. responsibility for the defense of Iceland, but the United States retained certain rights at Keflavík. Iceland became a charter member of the North Atlantic Treaty Organization (NATO) in 1949. After the outbreak of hostilities in Korea in 1950, and pursuant to the request of NATO military authorities, the United States and Iceland agreed that the United States should again be responsible for Iceland's defense. This agreement, signed on May 5, 1951, is the authority for U.S. military presence in Iceland. Iceland is the only NATO country with no military forces.
Source:http://www.state.gov/www/background%5Fnotes/iceland%5F9910%5Fbgn.html (public domain).