Global Psyche: Magic Kingdom

For many Icelanders, elves don't just live in fairy tales. They dwell in hills and valleys, rocks and flowers, and even houses. Some reside on Álfhólsvegur (Elf Hill Road), a street in the town of Kópavogur. Others live at the Icelandic Elf School, which offers a nonacademic diploma in Elf Studies and leads an elf hunt in the nation's capital, Reykjavik.

Bearing no resemblance to Keebler characters, the huldufólk, or "hidden people," are human in size and appearance. Only, Icelanders believe, they are better-dressed, wear ornate jewelry, and form their own churches.

Only 3 percent of Icelanders lay claim to personal encounters, but 8 percent believe in them outright and 54 percent won't deny their existence, reveals a poll conducted in 2007 by Terry Gunnell, head of folkloristics at the University of Iceland. "Rather than believe," he explains, "they don't disbelieve."

Fearing curses, even skeptics go to great lengths to protect the hidden people. Patches of grass suspected to house invisible residents are left unmowed. To avoid removal of inhabited "elf stones," the general public can petition to divert roads and halt construction of buildings. "The Icelandic government wants to make sure that people with different beliefs are taken care of," says filmmaker Nisha Inalsingh, who explores the phenomenon in her documentary Huldufólk 102.

Iceland's pantheistic folklore, fiercely secular culture, and geographically odd terrain provide fertile ground for these convictions to flourish. Centuries-old folktales called Sagas are part of the academic curriculum and the cultural zeitgeist, and describe historical events, Nordic deities, and metaphysical occurrences.

Iceland's relative freedom of religion is also elf-friendly. For centuries the Christian Church has maintained that angels and devils are the only supernatural beings besides the Trinity. But unlike many other European nations, Iceland obtained religious freedom around the time it gained national liberty, which allowed ideas to develop without church opposition, says Árni Björnsson, former head of ethnography and folkloristics at the National Museum of Iceland.

Besides, Iceland's phantasmagoric landscape provides the perfect canvas for the imagination. Iceland is the least densely populated country in Europe, and many of its 300,000 people live closer to nature than to one another. Yet the hinterland is an unpredictable neighbor. Volcanos erupt; earthquakes occur out of nowhere. In winter, the Aurora Borealis decorates the night sky. "You can't trust everything you see," Gunnell says, which means that even in the country ranked by the United Nations as most developed in the world, people are at the mercy of forces they cannot predict—and that their ancestors would have been unable to explain. "Whether you believe in elves or not," Inalsingh says, "you can say they are a metaphor for nature."

Ocean's Elven

The huldufólk come in many different varieties:

• Blómálfar: Flower elves
• Búálfar: House elves
• Ættarfylgjur: Family spirits
• Fylgjur: Guardian angels, accompanying spirits