Ég skil þetta betur svona.

Skil is the 1st person singular present tense of the verb skilja, meaning to understand.

So:

• ég skil = I understand
• þú skilur = you understand
• hann/hún/það skilur = he/she/it understands

In this sentence, Ég skil simply means I understand.

Þetta means this or this thing here, and it is the object of the verb skil.

So in:

• Ég skil þetta
  = I understand this

A learner may expect a different form for this when it is the object, but in Icelandic, þetta is the normal neuter singular form, and in this case the nominative and accusative look the same.

That is why you see þetta, not some visibly different object form.

Betur means better, but grammatically it is an adverb, not an adjective.

Here it describes how well the speaker understands something:

• Ég skil þetta. = I understand this.
• Ég skil þetta betur. = I understand this better.

It is the comparative form connected with vel (well):

• vel = well
• betur = better
• best = best

So betur modifies the verb skil, not the noun þetta.

Here, svona means like this, this way, or in this way.

So the sentence means something like:

• I understand this better like this
• I understand this better this way

It often refers to the manner in which something is being explained, shown, arranged, or done.

For example, if someone is explaining a grammar point differently, the speaker might say this to mean: Now that you are explaining it this way, I understand it better.

They do different jobs:

• betur = shows comparison: better
• svona = shows manner: like this / this way

So:

• Ég skil þetta betur.
  = I understand this better.
  This says understanding has improved, but not necessarily why.

• Ég skil þetta betur svona.
  = I understand this better this way.
  This adds that the improved understanding comes from this particular way of presenting or doing something.

The word order is natural Icelandic main-clause order:

• Ég = subject
• skil = verb
• þetta = object
• betur svona = adverbial elements

A very literal breakdown is:

• I understand this better this-way

Icelandic often places adverbs like this after the object.

You can also change the order for emphasis. For example:

• Svona skil ég þetta betur.
  = This way, I understand it better.

That version puts extra emphasis on svona.

Usually, no—not in normal standard Icelandic.

Unlike some languages, Icelandic normally keeps the subject pronoun in ordinary sentences:

• Ég skil þetta betur svona.

Leaving out Ég would usually sound incomplete unless it is part of a special context, such as notes, diary style, or very informal speech where the subject is already completely obvious.

So for a learner, it is best to keep Ég.

Not always. Svona is a very common word with a range of uses depending on context.

It can mean things like:

• like this
• this way
• so
• sometimes even a softer conversational well / sort of, depending on the sentence

But in Ég skil þetta betur svona, the most natural meaning is clearly:

• like this
• this way

So here it refers to the way something is being explained or presented.

Yes, it is natural and idiomatic.

A speaker would use it in situations like:

• someone explains something differently
• a diagram or example makes something clearer
• a person wants to say that a new presentation helps them understand

It sounds like a normal, everyday Icelandic way to say:

• I understand this better this way.