Silver thin films in the thickness range 2-10 nm produced by thermal evaporation onto glass substrates were systematically iodized and carefully characterized by X-ray diffraction, atomic force microscopy (AFM) and optical absorption spectroscopy. While the uniodized films are X-ray amorphous in keeping with their quasi-continuous nature and 2D islanded structure, briefly iodized films showed characteristic beta AgI structure. Most interestingly, AFM of Ag films revealed uniform triangle-shaped embryos whose shape does not change appreciably upon iodization. Optical absorption spectra of uniodized Ag films show intense surface plasmon resonance (SPR) features with maxima at 440, 484 and 498 nm for the films of thicknesses 2, 5 and 10 nm, respectively, with 5 nm films showing properties characteristic of optimally matched dielectric and electronic properties of the substrate and sample, respectively. Finally, an interesting and unique SPR-exciton phase transition is observed as the ultra-thin films are progressively iodized. These Ag and AgI films could be promising candidates for plasmonic and nanophotonic applications.