Modern words in Icelandic come from two main sources.
1) There is an Icelandic commitee that meets to discuss new words.
This is now the official way new words are created,
Sadly they mosly come up with long winded descriptive names that don't
capture the imagination.
Sometimes they hit on a nice one like Tölva for computer.
E.g. geisla (shiny) and diskur (disk) - geisladiskur (a CD)
geimfari(Big-space traveller, Astronaut)
Note: All words decline according to the final word, so its a Masculine noun
(gen -s, nom pl. -ar)
2) Danish.
Before Iceland became independent again in 45 it was under Danish control.
Danish is still taught to Icelanders as a Scandinavian lingua franca.
So Danish has had a lot of influence on Icelandic.
Before the language commitee many words were adapted from Danish.
Hence Danish Bil - car and Icelandic Bíll.
A third source is "words that just catch on".
Pagers are called Friðþjófur.
Its a perfectly fine name, Like Olafur or Eirikur.
But it also means "peace thief", which is a nice apt description of a pager.
So it caught on.