From the AKC Breed Standard:
Temperament: The Icelandic Sheepdog is a hardy and agile herding dog which barks, making it extremely useful for herding or driving livestock in the pastures, in the mountains or finding lost sheep. The Icelandic Sheepdog is by nature very alert and will always give visitors an enthusiastic welcome without being aggressive. Hunting instincts are not strong. The Icelandic Sheepdog is cheerful, friendly, inquisitive, playful and unafraid. A confident and lively bearing is typical for this dog

The dog has guarding instincts and will sound the alarm by barking
Protecting the sheep flocks and newborn lambs against birds of prey, hence its characteristic ability to observe and bark at everything that approaches from above.
The dog will want to protect little domestic animals like colts and lambs,
 but still be interested in hunting little rodents.
He will act as a living fence around the premises that he considers to be the territory belonging to his family.
The dog can be vocal when playing and sometimes when left alone.
While some are more vocal than others,
 there should be a reason for the barking.

Barking for no reason is not typical for this breed,
 they are usually very calm and quiet when not guarding or playing.
It is not uncommon for the Icelandic Sheepdog to howl at some sounds,
 like music, telephones, church bells and etc
They are also very affectionate and lovable breed that loves their family and is generally very gentle with children.
To learn more about the Icelandic Sheepdog and it's temperament,

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