Reykjavík parties like a city ten times its size. Sure, there are only 180,000 people in the metro area, but it seems like every single one of them between the ages of 18 and 50 goes out on Friday and especially Saturday nights.
Reykjavík bars change constantly. If you're confused, your best bet is just to approach someone on the street after midnight on a Friday or Saturday and ask them. Icelanders are really friendly, late at night.
You can also rent a friend. No, really. Jon Kari Hilmarsson, a genial guy in his late 30s who knows everyone in town, is the "Icelandic Nightlife Friend," and he'll design a customized nightlife tour for up to four people for ISK 25,000. Contact him at +354 692 1003, or go to www.nightlifefriend.is.
During the summer of 2004, the place to be for the 18-25 crowd was Solon, Bankastræti 7a. Thirty-somethings meet and mingle at Thorvaldsen Bar, Austurstrati 8. The two best dance floors in town are at Pravda, Austurstræti 22, and Nasa, on the main square opposite the Hotel Borg. For live music, your best bet is Gaukur á Stöng, Tryggvagata 22.
By the way, if you want to avoid the nightlife and get a good night's sleep, stay away from Laugavegur and from the downtown square opposite the Hotel Borg on weekend nights.