My favorite place in Iceland.
Glacial lagoons are formed when too much of a glacier (usually a so-called “outlet glacier” because it’s a smaller glacier attached to a larger one) melts from underneath. Eventually the water builds up below the glacier, and the ice acting as a dam eventually bursts. The water, glacier, and most of the countryside explode as the water rushes to lower levels. This water rushes to the sea, occasionally creating lakes or lagoons along the way. See also: the Diamond Beach.
It is, frankly and without any trace of irony, marvelous.
If you’re on the fence about whether or not to add this place to your Iceland itinerary, let me fix that for you. Add it immediately.