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Oxararfoss (or more accurately Öxarįrfoss; I think is pronounced "UEWX-ar-our-foss") was a waterfall that seemed to be more of a side attraction in the historically important UNESCO World Heritage Site of Žingvellir ("THING-vet-lur"). Moreover, I believe this was actually an artificially created waterfall due to water diversion that took place several centuries ago to support assemblies or Žings (pronounced "THINGS"), where consensus decisions were made. I'm still a little fuzzy about that statement about water diversion, but it might also contribute to some of the pools in the historical site that were actually drowning pools (to drown outlaws or dissenters apparently).
Regardless of its origins, we found this to be an attractive waterfall and gave us even greater reason to visit this site. As if that wasn't enough, this area also happens to be in a rift valley where Iceland is getting pulled apart by the Mid-Atlantic rift between the European Plate and the North American Plate. So there's some interesting geology going on here adding even more atmosphere to our visit.
The walkway for the falls is actually from a different car park than that of Žingvellir, but they're close enough that I suppose the whole thing can be walked regardless of which car park you chose to park at.
Directions: Žingvellir is one of the major attractions on the Golden Circle and is about 54km east of Reykjavik via the shortest approach from the west (along Route 1 to Route 36 to Route 361 and finally Route 362).
We actually drove over from Faxi about 61km to the east.