Iceland is gorgeous and surprisingly green in the summer. 2 weeks will be just enough to spend a weekend in Reykjavik and do a tour around the island on the Ring Road. I would shoot for 20 days so that you can take your time, although Iceland is very expensive and those days add up.
Some highlights are:
1) Waterfalls
a) Gulfoss - the largest waterfall in Europe
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Waterfalls/slides/Iceland_0127-Gulfoss_Waterfall.html
b) Svartifoss (Black Falls)in Skaftafell National Park - an interesting waterfall surrounded by dark hexagonal lava columns.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Waterfalls/slides/Iceland_0402-Svartifoss_Waterfall.html
c) Seljalandsfoss Waterfall - a beautiful waterfall that you can walk behind. It was featured in the Amazing Race.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Waterfalls/slides/Iceland_0203-Seljalandsfoss_Falls.html
d) Skogar Falls - a larger waterfall on the southern part of the island you can hike up.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Waterfalls/slides/Iceland_04_E_2_09-Bench_Skogar_Falls.html
2) Geothermal Areas:
a) The Blue Lagoon - probably the most famous attraction. It's a geothermal bath said to be able to cure skin diseases.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Geothermal_Springs_Geysers/slides/Iceland_04_E_4_01-Blue_Lagoon_Geothermal.html
b) Mývatn Nature Baths - Similar to the Blue Lagoon but on the opposite (Northeastern) end of the island.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Geothermal_Springs_Geysers/slides/Iceland_0944-Myvatn_Baths.html
c) Namafjall Hverir geothermal area - you will think you're on Mars here!
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Mud_Pots_Fumaroles/slides/Iceland_0814-Hverir_Geothermal.html
Icy areas:
a) Svinafellsjokull (Svínafellsjökull) Glacier - a popular glacier to hike.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Glaciers/slides/Iceland_0601-Svinafellsjokull_Glacier.html
b) Jökulsár Lagoon Glacial Lake - right on the ring road on the Eastern end of the Island. You can watch icebergs as they make their way to the sea.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Icebergs_Glacial_Lakes/slides/Iceland_0654-Icebergs.html
3) Towns, the 2 largest and most interesting IMO are:
a) Reykjavik - where everything happens. Be sure to check out the nightlife, it's phenomenal.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Reykjavik/index.html
b) Akureyri - A quiet town up north, it has a nice tranquil feel to it.
http://www.tommyimages.com/Stock_Photos/Scandinavia/Iceland/Akureyri/index.html