Wool
Icelandic sheep are very good for both food and wool (and probably friends as well, at least in olden times). One of the interesting things about the Icelandic wool is it's double layering, where the inner fibres provide mainly warmth and insulation and the outer fibres are strong and very resistant of water and wear, making it good in all weathers.
The tradition of making woollen clothes has been well maintained, not least due to Iceland's cold winters, and you will find wool shops all over. One of Iceland's main wool shops is the aptly named Iceland Wool (some info on that here).
Also, if you are more curious about the Icelandic wool (and sheep) perhaps
this link will be of some use to you.
http://www.birdcreekranch.com/sheep.html
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