Reykjavik is the capital of Iceland and home to about 120,000 people (200,000 citizens in the metropolitan area). It is also easily the largest city in the country and is the point of entry for 99% of all visitors to Iceland. The temperatures in Reykjavik are very stable because the it is surrounded by the ocean. Summer averages are about 13 degrees Celsius, and in the winter the average temperatures hover around -3 degrees Celsius.
The most common way to get to Reykjavik is by flying on Iceland Airlines though there are a few others offering regular flight schedules. Bear in mind that Keflavik Airport (the nearest one) is 50 kilometers away from the city. Reykjavik is beautiful. Once you're in a hostel in Reykjavik, walking is your best option to get around in the city. There are also buses, and biking is not a bad option either.
Remember to check out the Old Town area when you're staying in a Reykjavik hostel. Other things to see include the Pearl (a tower with fantastic views) and the National Cathedral.
Many people who go to Iceland, do so for the outdoor activities. There are some great hiking options near Reykjavik. Whale watching is another activity many people enjoy, and it's amazing to see the whales up close. You should ask your Reykjavik hostel staff, the local tour operators, and info sites about what to do.