Ég set varasalva í vasann þegar veðrið er kalt og þurrt.

Because í can take either the accusative or the dative, depending on meaning:

• accusative = movement into something
• dative = location in something

So:

• Ég set varasalva í vasann = I put lip balm into the pocket
• Varasalvinn er í vasanum = The lip balm is in the pocket

Here, the verb setja involves putting something somewhere, so there is movement into the pocket, and that is why vasann is accusative.

Vasi means pocket and is a masculine noun. In this sentence it appears in the:

• singular
• definite form = the pocket
• accusative case

That produces vasann.

A rough pattern is:

• nominative indefinite: vasi = a pocket
• nominative definite: vasinn = the pocket
• accusative definite: vasann = the pocket

So í vasann literally means into the pocket.

Veður means weather.
Veðrið means the weather.

Icelandic often uses the definite form where English might just say weather in a general sense, especially in clauses like this:

• þegar veðrið er kalt og þurrt = when the weather is cold and dry

So the definite article here is completely natural in Icelandic.

They agree with veðrið, which is:

• neuter
• singular
• in the predicate after er

The adjective must match the noun, so:

• kaldur = masculine
• köld = feminine
• kalt = neuter

and

• þurr / þurrt follows the same agreement pattern

Because veðrið is neuter singular, the correct forms are:

• veðrið er kalt og þurrt

Set is the present tense of setja:

• ég set = I put / I place
• ég setti = I put / I placed

In this sentence, the present tense expresses a habitual action:

• Ég set varasalva í vasann þegar veðrið er kalt og þurrt.
• I put lip balm in my pocket when the weather is cold and dry.

So this is not describing one past event, but a regular thing the speaker does.

Because Icelandic, like English, often uses the simple present for habits, routines, and general truths.

So ég set here means something like:

• I put
• I tend to put
• I usually put

Likewise:

• þegar veðrið er kalt og þurrt = when the weather is cold and dry

This is a normal way to describe repeated behavior.

Icelandic often leaves out possessives when the owner is obvious from context.

So:

• Ég set varasalva í vasann
  can naturally mean
• I put lip balm in my pocket

Even though the sentence literally says into the pocket, it is often understood as my pocket because the speaker is the one acting.

If needed, Icelandic could make it explicit:

• í vasann minn = into my pocket

But in everyday language, leaving minn out is very common when the meaning is obvious.

Here varasalva is the indefinite form, meaning lip balm rather than the lip balm.

That is natural because the sentence is talking about lip balm as an item in general, not a specific previously mentioned tube of lip balm.

Compare:

• Ég set varasalva í vasann = I put lip balm in my pocket
• Ég set varasalvann í vasann = I put the lip balm in my pocket

The second one sounds like a specific lip balm already known in the conversation.

It is in the accusative, because it is the direct object of set.

The speaker is putting lip balm somewhere, so varasalva is the thing being put.

A useful way to think about it:

• ég set hvað? = I put what?
• answer: varasalva

So varasalva is the object of the verb.

Here þegar means when.

It introduces a time clause:

• þegar veðrið er kalt og þurrt = when the weather is cold and dry

This is the normal word to use here.

Learners sometimes confuse þegar with words meaning if, but in this sentence the meaning is clearly temporal: whenever that weather condition happens, the speaker puts lip balm in their pocket.

Yes, it could.

The sentence as written has the main clause first:

• Ég set varasalva í vasann
  then the time clause:
• þegar veðrið er kalt og þurrt

That is completely natural.

But Icelandic can also put the time clause first:

• Þegar veðrið er kalt og þurrt, set ég varasalva í vasann.

Notice the word order change in the main clause:

• after a fronted clause, the verb comes before the subject:
• set ég, not ég set

This is a very important Icelandic word-order pattern.

Yes. Setja is a very common and natural verb meaning put, place, or set.

In this sentence:

• Ég set varasalva í vasann = I put lip balm in my pocket

It works well because the speaker is placing something somewhere.

Other Icelandic verbs can also translate as put in different contexts, but setja is the standard and expected choice here.

A rough pronunciation guide for an English speaker is:

• Ég ≈ yeg / yeh-g
• set = set
• varasalva ≈ VA-ra-sal-va
• í = ee
• vasann ≈ VA-san
• þegar ≈ THEH-gar
• veðrið ≈ VEH-thrith or VEH-thridh
• er = ehr
• kalt = kalt
• og = often like og or ohk, depending on speech
• þurrt ≈ thurt with a voiceless th

A few useful sound notes:

• þ is like English th in thin
• ð is like English th in this (though its exact pronunciation can vary)
• r is usually trilled or tapped
• Icelandic stress is usually on the first syllable

This is only approximate, but it can help you get started.