Iceland's Ring Road, also known as Route 1, is the largest and most important highway in the country. It circles the island almost entirely, providing access to more remote places like the Westfjords, the Snaefellsnes Peninsula and the Highlands via smaller roads that lead off it.
Most of the road is just a single lane going each way, however this isn't normally a problem as it doesn't see much traffic! The majority of the Ring Road is well-paved and even the unpaved sections are in surprisingly good condition, allowing any rental car to drive on it safely - there shouldn't be any need to rent a 4x4 if you're sticking to Route 1.
The fact that it connects most of Iceland's most important places of interest and its excellent condition mean that driving around the Ring Road is the easiest and most comfortable way to explore the country.