Það er vandræðalegt þegar síminn hringir á fundi.

Yes, það literally means it, but in this sentence it works as a dummy subject, just like English it in It is embarrassing when the phone rings during a meeting.

There is no specific thing that það refers to. It is just there because Icelandic, like English, usually wants a subject in this kind of sentence.

So:

• það er vandræðalegt = it is embarrassing
• það does not mean a particular object here

Because vandræðalegt is the neuter singular form of the adjective vandræðalegur.

In this sentence, the adjective is being used after það er, and Icelandic normally uses the neuter singular in this kind of general statement.

The adjective forms are:

• vandræðalegur = masculine
• vandræðaleg = feminine
• vandræðalegt = neuter

So það er vandræðalegt is the natural way to say it is embarrassing.

The dictionary form is vandræðalegur.

That is the masculine nominative singular form, which is usually how Icelandic adjectives are listed in dictionaries.

Here are the three singular nominative forms:

• vandræðalegur = masculine
• vandræðaleg = feminine
• vandræðalegt = neuter

So if you want to look it up, search for vandræðalegur.

Þegar means when.

It introduces a time clause:

• þegar síminn hringir = when the phone rings

So the whole structure is:

• Það er vandræðalegt = It is embarrassing
• þegar síminn hringir á fundi = when the phone rings during a meeting

That is because þegar introduces a subordinate clause.

In Icelandic main clauses, the finite verb usually comes in second position. But after a subordinating word like þegar, the normal order is:

• þegar + subject + verb

So:

• þegar síminn hringir = when the phone rings

This is normal subordinate clause word order.

Because síminn means the phone.

Icelandic usually adds the definite article to the end of the noun:

• sími = a phone / phone
• síminn = the phone

So:

• síminn hringir = the phone rings

Also, síminn is in the nominative case here because it is the subject of hringir.

Hringir is the present tense, 3rd person singular form of the verb að hringja.

So:

• að hringja = to ring / to call
• ég hringi = I ring / I call
• síminn hringir = the phone rings

In this sentence it means the phone is ringing, not that the phone is calling someone.

This is one of those places where you should not translate the preposition too literally.

In Icelandic, á fundi is the normal expression for at a meeting / in a meeting.

So even though á often means on, here the whole phrase means:

• á fundi = at a meeting / during a meeting

This is a very common expression, and it is best learned as a set phrase.

Because the preposition á takes the dative here.

The noun is:

• fundur = meeting

But after á in this expression, it becomes:

• á fundi = at a meeting

So fundi is the dative singular form of fundur.

This fits the usual pattern where á takes:

• accusative for movement onto something
• dative for location or being at something

Here there is no movement, so dative is used.

Both are possible, but they mean slightly different things.

• á fundi = at a meeting / in a meeting in a general sense
• á fundinum = at the meeting with a specific meeting in mind

So in your sentence, á fundi sounds more general:

• It is embarrassing when the phone rings during a meeting

If you said á fundinum, it would sound more like:

• It is embarrassing when the phone rings during the meeting

Normally, no.

In this kind of sentence, Icelandic needs það just like English needs it in It is embarrassing...

So:

• Það er vandræðalegt... = correct
• leaving out það would sound wrong in standard Icelandic

Yes. You can move the þegar clause to the front:

• Þegar síminn hringir á fundi, er það vandræðalegt.

That still means the same thing.

Notice that in the main clause after the fronted subordinate clause, the verb comes before the subject-like það:

• ..., er það vandræðalegt

That is because Icelandic main clauses follow the verb-second pattern.

Still, the original order is very natural and straightforward:

• Það er vandræðalegt þegar síminn hringir á fundi.

A few useful points:

• þ is pronounced like th in thing
• ð is pronounced like th in this or can be very soft depending on position
• æ sounds roughly like eye
• ll and nn can have special Icelandic pronunciations depending on the word, but nothing especially unusual here beyond normal practice

Roughly:

• Það ≈ thauth
• vandræðalegt ≈ VAHN-drye-tha-legt
• þegar ≈ THYE-gar
• síminn ≈ SEE-minn
• hringir ≈ HRIN-gir
• á fundi ≈ ow FUN-di

These are only rough English-style approximations, but they can help as a starting point.

It is an adjective here.

It describes the situation introduced by það er:

• Það er vandræðalegt = It is embarrassing

If you wanted the adverb embarrassingly / awkwardly, Icelandic would usually use vandræðalega instead.

So compare:

• Það er vandræðalegt. = It is embarrassing.
• Hann brosti vandræðalega. = He smiled awkwardly.

Not always.

Að hringja can mean:

• to ring
• to call
• to make a phone call

Examples:

• Síminn hringir. = The phone is ringing.
• Ég ætla að hringja í hana. = I am going to call her.

So the exact meaning depends on the context. In your sentence, because síminn is the subject, it clearly means the phone rings.