Various studies show that one third to half of Icelanders believe, or at least refuse to deny, the existence of these supernatural beings. They are also believed to live on the Faroe Islands. Often called elves, these beings are more like mirror images of humans, just more beautiful, lucky, intelligent, powerful and spiteful. They can only be seen if they wish to be seen and they hold sway over human lives.
Whether or not they are actually believed in by your average Icelander, they form an important aspect of the cultural heritage of Iceland and are often best characterised as going hand in hand with the Icelanders strong connection to nature. In Iceland, humans have been reminded again and again over the centuries of the sheer power and randomness of nature - it makes sense to attribute these natural occurrences in part to another being. Or as Terry Gunnell, Professor of Folklore at Iceland University, says "there's a sense of the landscape being very alive... a personification of the landscape".
There are two prominent stories about how the hidden people came about. There is mention of elves as far back as 1000 CE but it was not until the 16th and 17th centuries that the stories really became prominent in the public consciousness. In the 18th and 19th centuries, sightings of the hidden folk were quite common and there were many seers who could communicate with them.
The first origin story combines the long history of Christian faith in Iceland with the supernatural. One day in Adam and Eve's garden, God came to visit when Eve was halfway through cleaning her children.
She was embarrassed for her Creator to see her dirty children, so she hid them and presented only her clean children to him. God asked if they were all of their children and she replied yes. God, being omniscient, knew that she was lying and so in retaliation declared those hidden children would remain hidden for all time.
Their descendants are the hidden folk of today, while Adam and Eve's other children are our human ancestors.
The second story tells of a traveller who stops at a farm for supper. The farm family have two beautiful daughters and he asks if one will join him in his bed. As he tries to embrace her, he finds his hands go straight through her body as though she is not there. She explains that she is only a spirit without a physical body.
When Lucifer was expelled from Heaven with his army of fallen angels, those angels who neither fought him nor joined him were cast to the earth, to live as spirits among the hills and rocks.
Alaric Hall, a lecturer in Medieval English Literature and researcher into Icelandic folklore, speculates that part of the reason that hidden people emerged harks back to the Viking tradition of conquering during the Middle Ages. There is no evidence that anyone lived on Iceland before the Vikings arrived, making them the indigenous people of the land. However, Hall suggests that this idea of a hidden people, resisting through powerful acts of nature, emerged at this time for the Viking people to take pride in conquering Iceland over an 'other'.
In the 18th and 19th centuries the hidden folk were similar to contemporary people -
they farmed or fished, they got married, had children, had pastors and had funerals. But everything they did, they did better than humans.
They were the source of human envy - when famine swept the land, many young shepherds claimed to have seen huldufolk in the hills feasting.
Today, the huldufolk are depicted in country settings, in 19th century rural dress. They stand for the old ways of Iceland, where mere survival was a struggle, and remind society at intermittent times that nature still rules with impressive shows of power (volcanoes, rockslides, etc.).
Stories of hidden folk form an essential part of the social fabric of modern day Iceland. There is an elfschool in the capital and tours are regularly run in Hafnarfjorour, considered the elf capital of Iceland.
Not only are they a huge tourist draw to the newly booming tourism industry, but they have an impact on urban planning. There are a number of instances where roads have had to be redirected or halted due to crossing the path of an elven church or dwelling! So much so that the Icelandic Road and Coastal Administration (who manage these projects) have developed a standard five page reply to any press inquiries about such a matter.
Often the issues are resolved through a seer mediating and finding the hidden people a new home or the road even being redirected. Failure to pay attention to the concerns of the hidden folk have resulted in expensive machinery breaking and freak accidents befalling workmen.
So whether individuals believe in the hidden folk or not, the general approach is to respect their dwelling places.
To read some of the common hidden people legends, see the Reykjavik Grapevine's collection.