There has been flooding in a river in south Iceland which apparently happened after an earthquake. Other rivers leading from the Vatnajokull ice cap (home to Grimsvotn) are currently still normal/dry. The flooding, known locally as a Jokulhlaup is caused by increased temperature under the glacier. This can be from geothermal warming, and/or may be as the result of a sub-glacial eruption.
In a few days the flooding should reach it’s maximum according to the Icelandic scientists. There is a possibility that Grimsvotn could erupt, however it is likely to be similar to the 1998 or 2004 eruptions.
There is a suggestion that the GPS monitors show a sudden uplift which would indicate magma movement, however I can find no evidence that is available on the Icelandic sites to confirm this, and the tremor graphs would appear to suggest otherwise.
Within the ice filled Grimsvötn caldera intense geothermal activity continuously melts the ice to form a subglacial lake, which at intervals of 5 to 10 years is emptied along subglacial channels to create large floods (jökulhlaup) on the sandur plain, Skeidararsandur, on the Icelandic south coast.
03 Nov 2010 Update
The seismic tremor is continuing – which is being caused by the water(? so they say ?). There are no signs of a volcanic eruption yet.
Presently, there are no detectable signs of the beginning of a volcanic eruption at Grímsvötn.
Source: Icelandic Met Office