Despite being located just south of the Arctic Circle, Iceland temperatures are milder than you might think. This is mainly due to Iceland's position in the Gulf Stream, which brings warm air to it.
Overall, the weather in Iceland is extremely variable from one day to the other, and even within the day. An Icelandic proverb states: “if you don't like the weather now, just wait 5 minutes!” . It can swing from a clear blue sky to rain or even snow and then back again within an afternoon.
http://en.vedur.is is the most accurate Icelandic weather site and features hourly weather reports for each region.
General trends are colder weather inland (far from the coast, at altitude) and more rainy weather in the south (Vik region). You should also know that the wind is almost constant in coastal areas, as is the case on any island, but even in the highlands.
Surprisingly, Iceland is not that much colder than in other European countries in winter.
Reykjavík in winter
The winter months from November to March average around 0 °C in Reykjavík and on the coasts, but temperatures drops well below 0 in remote areas in the highlands when you travel inland.
Midnight sun in Reykjavík
From mid-June through mid-August, average temperatures in coastal regions generally range between 10 °C and 15 °C during the day, and hover around 10 °C in the highlands. At night, it can drop to 5 °C or even lower. However, in July or August temperatures can rise above 20 °C.