If you're on the hunt for entertainment in the Icelandic capital, look no further than Laugavegur Street. Whether by day or by night, this is very much the commercial hub of Reykjavik, in some areas comprised almost entirely of shops, restaurants, bakeries, cafes, bars, and lots o' foot traffic. For entertainment purposes, you'll want confine your search area to the kilometer or so section closest to old town, including the stretches where "Laugavegur" changes its name to "Bankastræti" and, after crossing Lækjargata, to "Austurstræti" (don't worry, it's all the same straight road, so don't let the name changes fool you).
During the day, you'll find plenty here to satisfy your stomach, including restaurants, bistros and, believe it or not, hot dog stations (true story). In fact, most establishments will have a menu, so don't feel as if you have to skip a cool-looking cafe just because you're searching for a place to have lunch. By night, especially Thursday-Saturday, watch out; in the blink of an eye, Laugavegur transitions into a surprisingly vibrant nightlife hub, complete with queues, live music/djs, and plenty of alcohol to go around. Names tend to change quickly, but keep your eyes peeled for well-known establishments like Dillon, Lebowski Bar, B5, and The English Pub to get your night headed in the right direction. Then just follow the crowds, since sometimes it's just as much fun out on the street itself as it is in any of the bars. Cheers.