Iceland is convenient to cut out using a simple bounding box, as it's surrounded by sea and has enough space around it that the box doesn't touch any other land. For most countries, you'll need to cut out a more complex shape from a planet file, and that's where the bounding polygon task comes in.
The bounding polygon task works in a similar way as the bounding box task, but instead uses a set of arbitrary polygons to define the area for which you want data. This is particularly useful where you're trying to cut out a country that shares land borders with others, or where a coastal boundary doesn't form a straight line. The bounding polygon task is also much slower than a bounding box, as a more complicated algorithm is needed to decide whether a point lies inside the polygon. This may not be a problem, but it's worth bearing in mind.