Here's an explanation: http://wiki.warlight.net/index.php/Manual_Distribution
In that particular game, nhias got first pick. He gets Iceland.
After that, you get two picks. Since your first choice is already taken, you get picks 2 and 3, Ireland and Norway.
Then, nhias gets his next two available picks... Iceland is taken, Norway is taken, so he gets picks 3 and 4, Benelux & France.
... and so on.