First, Iceland did not default on its sovereign debt. Thus, although the consequences I outline below are considerable, they are not as severe as those Greece can expect. The large Icelandic banks failed. They grew far too large on the basis of short term borrowing and speculation in leveraged property assets. This was not Icelandic government debt. However, the Iceland central bank did not have the resources to act as lender of last resort and had to allow the banks to go bankrupt and be restructured. International creditors of the banks ended up being shafted, and international arbitration confirmed the Iceland bankruptcy court's right to impose this, even though domestic creditors were protected.
Now for the relatively limited consequences. The capitalization of the Iceland stock market fell 90%. The country was in recession from 2007-2010. Capital controls were imposed that are still in force. 1-2% of the country's population demonstrated regularly and vigorously, forcing the government's resignation.
For Iceland, this was not totally catastrophic, although unpleasant. Greece, with huge sovereign debts already in partial default, will be in no position to restore the banking system following a collapse. Without a deal with its creditors, the economy is going to completely grind to a halt. Aid agencies are going to need to set up soup kitchens and provide health care. I anticipate a dual currency system. The euro will still be used for international transactions, but euros will be extremely scarce and access to them subject to strict government control. Bank deposits will be forcibly converted to drachmas at a notional 1:1 exchange rate. The drachma to euro exchange rate on the black market will quickly rise to tens, hundreds or thousands to one. Inflation will become a severe or catastrophic problem.
Note that with all the costs of restoring the banking system and stimulating the economy to recover from the recession, Iceland's sovereign debt-to-GDP ratio never exceeded 85% and is now down to a very manageable 60%.