Umferðin minnkar oft seint á kvöldin.

The ending -in is the suffixed definite article, so umferðin means the traffic.

A few useful points:

• Icelandic usually attaches the to the end of the noun instead of putting a separate word in front.
• umferð = traffic
• umferðin = the traffic

Here, umferðin is the nominative singular definite form.

Also, Icelandic sometimes uses the definite form in places where English would just say traffic with no article. A bare umferð is also possible in some contexts, but umferðin sounds like the traffic in the situation being discussed.

minnkar is the present tense, 3rd person singular form of the verb minnka.

So:

• að minnka = to decrease / get smaller / lessen
• minnkar = decreases / gets lighter / becomes less

It is 3rd person singular because the subject, umferðin, is singular.

In this sentence, the verb is being used intransitively: the traffic itself is decreasing.
Compare:

• Umferðin minnkar. = The traffic decreases / gets lighter.
• Þau minnka kostnaðinn. = They reduce the cost.

So minnka can be either become less or make something less, depending on context.

Because that is a very normal Icelandic word order in a main clause.

Icelandic usually follows the V2 rule in main clauses: the finite verb tends to come in the second position. In your sentence:

• Umferðin = first element
• minnkar = second element
• oft comes after that

So Umferðin minnkar oft ... is perfectly natural.

This is different from English, where frequency words like often commonly come before the main verb:
Traffic often decreases ...

In Icelandic, you can also move things around for emphasis, but the verb usually stays second:

• Umferðin minnkar oft seint á kvöldin.
• Oft minnkar umferðin seint á kvöldin.
• Seint á kvöldin minnkar umferðin oft.

All of those are possible, but the original sentence is a neutral, natural version.

Because seint is being used adverbially, meaning late.

The basic adjective is:

• seinn = late

But Icelandic often uses the neuter singular form of an adjective as an adverb:

• seinn → seint

So here:

• seint = late

This is very common in Icelandic. Compare the same pattern with other words:

• góður → gott used adverbially in some contexts
• hraður → hratt = quickly

So seint á kvöldin means late in the evening / late at night, and seint is the correct adverb form.

á kvöldin is a common time expression meaning something like:

• in the evenings
• in the evening
• sometimes, depending on context, at night

The plural is very common in Icelandic when talking about a repeated time period or a usual part of the day.

That fits especially well here because the sentence also has oft (often). So the idea is not one single evening, but a repeated pattern.

Similar expressions include:

• á morgnana = in the mornings
• á daginn = during the day
• á næturnar = at night / during the nights

So even if English might use singular wording, Icelandic often uses a plural time expression here.

Here, kvöldin is accusative plural definite.

Why?

• The noun is kvöld = evening (neuter)
• In this time expression, á takes the accusative
• The definite plural form is kvöldin

So:

• kvöld = evening / evenings
• kvöldin = the evenings
• á kvöldin = in the evenings

This is one of those very common fixed time expressions that learners just get used to as a chunk.

It describes a general habit or pattern.

The word oft strongly suggests repetition:

• oft = often

So the sentence means that this is something that often happens, not necessarily something happening at this exact moment.

This is also a good example of how Icelandic simple present works much like English simple present for habitual actions:

• Umferðin minnkar oft ... = a regular pattern

If you wanted to stress that something is happening right now, Icelandic can use context or a different construction, for example:

• Umferðin er að minnka. = The traffic is decreasing / is getting lighter.

Yes, you might see or hear that, but it changes the feel a bit.

• umferðin = the traffic
• umferð = traffic (indefinite / bare noun)

With umferðin, the sentence can sound like it refers to the traffic in a known situation or area.
With bare umferð, it can sound a bit more general, abstract, or statistical.

So both may be possible depending on style and context, but the given sentence with umferðin is very natural.

For an English speaker, the important thing is: Icelandic article usage does not match English perfectly, especially with broad ideas like traffic, weather, economy, and so on.

Yes. Icelandic allows more flexibility than English, but the finite verb normally stays in second position in a main clause.

So you can shift different parts forward depending on what you want to emphasize:

• Umferðin minnkar oft seint á kvöldin.
  Neutral statement.

• Oft minnkar umferðin seint á kvöldin.
  Emphasizes often.

• Seint á kvöldin minnkar umferðin oft.
  Emphasizes the time.

Not every possible order sounds equally natural in every context, but this kind of movement is very normal in Icelandic.