Reykjavík is the capital and largest city of Iceland and with an urban area population of around 200,000, it is the home of the vast majority of Iceland's inhabitants. It is the centre of culture and life of the Icelandic people as well as being one of the focal points of tourism in Iceland. The city itself is spread out, with sprawling suburbs. The city centre, however, is a very small area characterized by eclectic and colourful houses, with good shopping, dining, and drinking. Off-road driving (in all of Iceland) is illegal and huge fines are imposed when you are caught.
When it started to develop as a town in the 18th century, Reykjavík had already been inhabited for almost a thousand years. Legend has it that the first permanent settler in Iceland was a Norwegian named Ingólfur Arnarson. He is said to have thrown his seat pillars into the sea en route to Iceland, and decided to settle wherever the pillars were found. The pillars washed up in Reykjavík, and so that was where he set up his farm.
Although the story of Ingólfur Arnarson is not widely believed to be true by modern historians, it's clear that Reykjavík was one of the very first settlements in Iceland. Archaeological remains confirm that people were living there around the year 871, and for the first few centuries of Icelandic settlement Reykjavík was a large manor farm. Its fortunes steadily waned as other centres of power increased in importance. By the 18th century, the farm of Reykjavík was owned by the king of Denmark (under whose domain Iceland fell at the time). In 1752, the estate was donated to a firm, Innréttingarnar, led by Icelandic politician Skúli Magnússon. Innréttingarnar were meant to become an important industrial exporter and a source of development in Iceland, and their main base was in what is now the heart of Reykjavík. Although the company didn't achieve all its high ideals, it did lay the foundations of Reykjavík as it is today. In 1786, Reykjavík got a trading charter and it soon started to grow in importance.