It's natural. They're called river terraces.

Plan a trip in spring / autumn when there is still plenty of light to do other things should you get no luck with the Aurora. When Iceland is under the Jet Stream you will get a conveyor of frontal systems coming across the Atlantic one after another, laden with cloud and rain. There's nothing you can do to guarantee that you will see the lights. It's dependent entirely on the weather and on solar activity, which you can't plan for more than a few days in advance.

Wouldn't bother with a tour company myself. If you get the right conditions, it's entirely possible to see the lights from the middle of Reykjavik, and you don't need to drive far if you want to get somewhere truly dark.