Yuletide gifts are not new to Iceland, but they are only about one hundred years old in the form in which we know them today. In the Saga era, chieftains regularly gave gifts to their guests at Yule. These were most often of a practical and serviceable nature.
In past centuries everyone received an article of clothing from their employer, along with a pair of ornate shoes known as Jólaskór, Yule Shoes. These were not considered presents but a bonus for work well done.
Early in the last century it became customary to give each child, or even everyone in the house, a candle at Yule. This was no small thing in the dark of the winter nights in Iceland, as the light from the candles was much brighter than the light from the ordinary oil lamps in which liver oil was burned. Later on it became customary to add a deck of cards to the candle.
A famous Icelandic verse says:
Bráðum koma blessuð jólin,
Soon the blessed Yule will arrive,
As everywhere else in the world, Yule presents grew in size and quantity, and just over 100 years ago merchants start advertising their goods as Yule presents during December. Today this starts in November, with the Yule season getting longer, presents continuing to grow in size and in terms of cost, and the reasons for giving them fading quickly from memory.
In the Saga era the chieftains gave gifts at Yule to cement friendship, which seems to be a pretty good reason to give gifts. Nowadays most Yule gifts are supposed to show our friendship too, and our adherence to our faith. Sadly this is often overshadowed by burgeoning commercialism.
In Iceland, as I suppose is the case the world over, children like to receive toys as Yule presents, and the "soft" packages that grandparents tend to give are not always popular as they are likely to contain clothes. But a new piece of clothing is considered necessary as a Yule present in Iceland.
Another constant of every Yule in Iceland are the books. There are more books sold per capita in Iceland than in most other countries, and the bulk of those sales are before Yule. The Yule present for Father and Mother is very often a book and the children always receive a book or two.