The Árbæjarsafn museum in Reykjavík is one of my favorites. It is a historical museum built around the Árbær farm. The farm which was a traditional turf roof house had been abandoned for years when the city decided to open it as an open air museum. The farm was restored and old buildings from around the country that have had to be removed due to changing times have found a place in Árbæjarsafn. All of these houses are open to the public in the summer and occasionally in the winter. You will see Icelandic teenagers playing traditional roles in the houses as their summer jobs.
This picture is taken by Krisatomic. You can read his full post with lots of pictures from the Árbæjarsafn museum.