The hike itself is only medium difficulty and thus requires only medium fitness. Furthermore it is both very well marked and the trail is well prepared.
Laugavegurinn is traditionally scheduled as a four-day hike from Landmannalaugar to Þórsmörk, but could be done in two (staying at Álftavatn). I did it in three (doubling the first two stages thus staying in Álftavatn the first night) plus one additional day for the Fimmvörðuháls.
The main challenge is the weather: Four-season gear is needed as snow may fall anytime a year and/or fog may obscure visibility especially on the snowfields.
The 20 km-extension over Fimmvörðuháls next to the Eyjafjallajökull volcano (responsible for the the 2010 ash cloud) and down to Skógar and the Skogafoss waterfall is not to be missed. Though slightly harder than the previous days, the main challenge again remains the weather, especially:
The snowfields. One large before Hráftinnusker and one at the Fimmvörðuháls pass (where I actually got lost).
Even in high-season, the trail was not overcrowded. In addition if one follows my general rule of leaving late (10 am)- arriving lateyou may find yourself virtually alone on the trail. There are plenty space at the campsites and the sun is out until 10 pm.
It is well worth it to spend at least half a day at Landmannalaugar, hiking or bathing in the natural hot springs. Right next to the hot springs the water source is so hot that one may cook dinner/boil eggs there.
Hráftinnusker is a very cold and windy place. Therefore, and especially for those camping, it makes sense to double the first stage and camp at Àlftavatn.