No one told us how magnificently beautiful they were. Not a soul in Iceland, or those back home who had visited the country, told us this spectacular sight should not be missed.

We almost dropped it from our itinerary in favour of a few more days in the capital, Reykjavik, given the exorbitant cost of a hire car. But when I first clapped eyes on the gleaming, blue-tinged icebergs I gasped. How could anyone come to Iceland and miss this?

Bizarrely, many visitors do not venture the few hours from the capital to see these creaking great chunks floating majestically in milky blue glacial lagoons.

Perhaps our ignorance was born of the fact we had spent the first part of our trip in fishing villages in the rugged northern wilds of the Westfjords, away from tourism offices. But still.

It was summer. We were heading east from Reykjavik along the 1340-kilometre ring road, Highway 1, Iceland's main arterial, looking for a farmhouse to crash for the night when my partner caught a glimpse of the bergs in the rear-vision mirror.

See, this is the thing: there are no gaudy tourist signs in Iceland alerting visitors to attractions. Small, discreet, standardised brown signs with symbols - a bed for a hotel, a frosty for a glacier, a pile of rocks for a cultural site - is all that prompts visitors. Here, curiosity is handsomely rewarded.

So I could be forgiven for missing the brown sign, camouflaged against a backdrop of volcanic lava plains resembling rocky road topped with clumps of spongy, iridescent moss.

We reversed, parked and climbed a small roadside mound, and our jaws dropped as we were transported into a cool, tranquil, panoramic postcard of icebergs quietly drifting. Beyond, the blinding white glacier Breidamerkur-jokull appeared as if a spell had been cast upon it, freezing its river midstream as it oozed down the mountain from Vatnajokull, the third largest icecap in the world after Antarctica and Greenland.

The icecap, at places a kilometre thick, has finger-like glaciers dribbling down the sides, eventually hardening, before later breaking off into the glacial lagoon called Jokulsarlon. The only thing missing was a polar bear (they don't live here unless they've accidentally floated over on an ice floe from Greenland).

We clambered down to the water's edge, strewn with sharp volcanic rock, and grabbed a chunk of ice as it drifted out to the Atlantic Ocean (the ring road runs between the glacier and the ocean). It hurt to hold the solid piece, smooth and glass-like, for too long.

It was 10pm, the landscape brightly lit by the midnight sun, and we were the only people there. It was eerie and surreal. Our excited voices were the only sound other than seals crying out and the gloop-gloop gurgling of the lagoon and creaking icebergs. An occasional thunderous crash marked an iceberg forming as the glacier's resistance to the earth's warmth relented.

Beneath the 8400 square kilometre icecap lie two volcanoes, which as recently as 1996 caused glacial outbursts resulting in devastating floods.

There are many opportunities to walk up onto glaciers and along the edge of an ice-carved valley - if you are game. Tourists are expected to look after themselves - there are no safety barriers, just a sign that says "Dangerous path".

We returned to the lagoon the next day and took a boat ride, careful not to come too close to the jagged beasts, lest they topple onto us and send us into the deadly, freezing water. We were told the icebergs may be hundreds of years old and take up to seven years to melt after breaking off. Some of the James Bond film A View to a Kill was shot here.

The icebergs' blue colour is an optical illusion, being the only shade they reflect. Some of them had dirty tiger stripes, the remnants of the mountain that the glacier had slowly sliced its way through, carving a valley that sits 300 metres below sea level.

It was difficult to comprehend such beauty, which came so unexpectedly, so quietly and so unassumingly. But that, in a way, is Iceland. An unassuming, romantic time warp where elves govern roadworks - a council must first seek their permission - and sheep graze by ancient turf-covered churches, their overgrown wool trailing like a scarf.

I cast my mind back to when a fisherman picked us up hitchhiking the week before in a small village in the Westfjords, where the power of nature is overwhelmingly evident, and took us for a long jaunt through the countryside with his sheepdog.

Where was he going, we asked? "Oh, nowhere," he replied.

Maybe he didn't understand us?

"Sunday driving. Just driving around with my dog. Not much to do," he chuckled.

After discovering our $300 Westfjords bus passes were useless because of the infrequent timetable, we decided to hitch from the tiny settlement of Patreksfjordur, nestled in a beautiful little harbour, to the westernmost point of Europe, the soaring cliffs of Latrabjarg, to see the puffins.

Our Ernest Hemingway lookalike meandered through pretty green countryside not unlike New Zealand, past salmon streams and waterfalls and barren, dark grey mountains resembling coal mounds poking into the clouds.

He chatted away, pointing out local sites such as the ship that a stubborn old fisherman had run aground when licence restrictions meant he had to give it up, until he almost ran out of petrol. "Ooh, I forget my mobile, too," he giggled. We had to convince him to leave us to save his reserve tank to get back home. It was only a few minutes before an Italian couple came by and shoehorned us into their four-wheel-drive, seated on top of each other.

The Latrabjarg cliffs, soaring 450 metres, are home to about a million birds, but it is the opportunity to come within centimetres of the puffins that is most exciting.

The Westfjords, a day's travel north by bus and boat from Reykjavik, is the country's oldest region. Icecaps and glaciers have carved about 50 deep fiords so convoluted at points along the coastline drive that it takes more than 100 kilometres to make 10 kilometres' headway.

Dotted with cultural relics - abandoned whaling stations, turf-covered villages - it is where the Viking explorer Floki Vilgerdarson named Iceland and where sorcery and witchery thrived.

With a decreasing population of 10,000, Patreksfjordur is charmingly small town. When we left a camera in the back of a man's ute, a policeman, who next picked us up, offered to track him down. Our description was, "Red Toyota, middle-aged man, smelt like a fisherman, headed west". A few hours later the officer found him, and our camera, and drove 20 kilometres to collect it. I thanked him again when I saw him at the supermarket later. "In Iceland, we have the best police service in the world," he said, grinning.

Our next stop was the even smaller Talknafjordur (pop. 370). A middle-aged Icelandic couple picked us up in their immaculate Volvo. They were seemingly reserved and we travelled in silence until we reached the town, a few pastel homes clustered around the shore of a spectacular harbour dotted with fishing vessels and a huge fishing station. They pointed to the biggest boat in the water - theirs - and took us on a tour of their fish factory, where they offered us smoked trout to take with us.

We later discovered they virtually run the town, employing most workers, who are increasingly Eastern European, particularly Poles, as locals flock to the capital.

Mike and Denise, a couple originally from New Zealand who have lived in Iceland for 15 years, were beside themselves when they bumped into us again (they had given us a lift from the ferry to the first village) and insisted we come to dinner and meet their friends.

It turned into a hilarious evening of gossip and small-town anecdotes. They kindly raided their stash of alcohol posted from the capital - there are very few bottleshops outside Reykjavik and the government-ordered hours are strict. (Alcoholism is rife - after all, it is dark for most of the year. )

The night ended with a 1am dip in an outdoor geothermal hot spring a few kilometres away as the sun went down. Only the steam from the water obscured a stunning view of mist-shrouded mountains casting dark shadows on the glimmering bay.

It was an unforgettable experience that perfectly summed up Iceland: the proverbial land of fire and ice, expansive, desolate and mysterious.

Destination Iceland

GETTING THERE

Only one carrier, Icelandair, flies to Iceland. Fares are cheapest from London (from about $633 return) or Scandinavia, but there are also flights from France, Germany and the Netherlands. See icelandair.co.uk for details. The domestic carrier is Air Iceland.

STAYING THERE

The tourist trade has only just begun and is dominated by organised groups of visitors who book out accommodation well ahead. Almost all accommodation, including bed and breakfasts and hotels, offer "sleeping bag accommodation" - a room at half price if you bring bedding. There are also farmstays and summer houses.

Car hire is the only viable method of transport for those on limited time, and it costs between $200 and $400 a day for a four-wheel-drive, which is necessary for any interior explorations.

Credit cards are accepted everywhere. Summer is cool but comfortable. Take a good wind jacket and warm socks.