Learn Icelandic: Þeir eru að baka brauðið.

In Icelandic, you talk about what is happening right now (the present continuous) by using the verb vera (to be) + að + the infinitive of the action verb. Here, eru is the "they" form of the verb to be, and að baka is "to bake". Together, eru að baka means "are baking".

Why is the word for "they" þeir in this sentence?

Icelandic has three different words for "they" depending on who or what you are talking about. Þeir is used when referring to a group of men or exclusively masculine nouns. If they were women, it would be þær, and a mixed group (or a group of neuter nouns) uses þau.

Where is the word for "the" in brauðið?

In Icelandic, "the" isn't a separate word that comes before the noun. Instead, it gets attached directly to the end of the word as a suffix! The base word for "bread" is the neuter noun brauð, and adding -ið makes it brauðið (the bread).

Can I just say Þeir baka brauðið instead?

Yes, but it changes the meaning slightly. Þeir baka brauðið is the simple present tense, meaning "They bake the bread" (as a habit or general fact). The sentence here uses eru að baka to emphasize that the baking is happening right at this exact moment.