The primary uses were bathing and washing. It wasn't until the 20th century that houses were first heated using geothermal energy. However natural and famously some artificial pools, such as Snorralaug, have existed for a long time.

There are multiple references in old texts about people using warm pools for bathing.

source (icelandic): https://www.visindavefur.is/svar.php?id=1685