That is the interesting thing about this particular law. It cites violence as its primary locus of concern. Halla Gunnarsdottir, a political adviser to Iceland's interior ministry told the Christian Science Monitor, "When a 12-year old types 'porn' into Google, he or she is not going to find photos of naked women out on a country field, but very hardcore and brutal violence."
Historically there are limits to free speech, when the speech causes harm to others. You cannot yell "Fire" in a crowded theater, etc. In New Jersey, recent laws against bullying restrict certain kinds of harmful speech that are apparently not protected by our constitutional freedoms.
The harmfulness of pornography cannot be underestimated. Iceland is focusing on "violent" varieties of pornography--but I would question whether there are any other types. When we misunderstand the nature of our bodies great harm is done not only to children who may come across inappropriate images, but to the subjects who become convinced that nudity is their most marketable gift and viewers whose perceptions of healthy sexuality are significantly warped.
The fact that Iceland's proposed legislation will likely be thwarted is an important reminder that western values are not necessarily representative of the ways of God's coming reign. Pornography will likely continue to be protected free speech in Iceland and the rest of the "western world"--but let us not be confused--freedom can be oppressive, and as long as perversion of human sexuality is protected by free speech, there will be victims. For more about the victims and what you can do to help, see Beauty for Ashes Ministries.