Iceland is on a type of tectonic plate boundary called a divergent boundary. The divergent boundary, called the Mid-Atlantic Ridge, that runs through the center of Iceland occurs because two plates, the North American Plate and the Eurasian Plate, are pulling away from each other.
Plate Tectonics explains what happens as the North American and Eurasian Plates pull away from each other; new crust is formed from erupted magma along either side of the ridge. As with other divergent boundaries, eventually a rift forms. When this occurs, the Icelandic land mass is going to separate, with water from the Atlantic Ocean filling in this widening gap and splitting the country in two.
Live Science describes the Mid-Atlantic Ridge as a volcanic seam thousands of miles long where tectonic plates meet. At multiple points, magma erupts from deep inside the Earth and creates new crust, pushing the tectonic plates apart. All such volcanic seams are at the bottom of the ocean except for the portion of the Mid-Atlantic Ridge present in Iceland, the only place where it can be seen on land.
Iceland offers scientists a unique opportunity to research the processes that occur on submerged mid-ocean ridges. The ridge also provides a natural laboratory for the study of plate tectonics and geothermal energy.