Two months ago I spent a few days looking around for good images of Iran before the Islamic Revolution, as most people know next to nothing about Iran and these images of Iranians during the 1970s without veils, wearing miniskirts or whatever else they feel like, and this usually comes as a bit of a (pleasant) shock to those that have been given an incorrect impression of the country.
Whenever this subject comes up the next comment to follow is usually along the lines of "Yeah, but the Shah ran a pretty repressive government as well and in spite of these pictures Iran was certainly no paradise before the revolution. Plus these are pictures of the wealthy." Okay, Iran under the Shah wasn't a paradise either. It's also true that these pictures are quite easy to find due to the large diaspora that sees the current government as illegitimate and has an interest in making Iran up to the 1970s look as good as possible.
Beyond the political discussion though, the images of Iran in the 1970s show that Iranians on the whole just aren't that conservative as individuals. Some countries have conservative governments as a reflection of the views of a very conservative populace, but in Iran this isn't the case, and the voting for Mossadegh before proves this - a lot of other countries in the world would never even dream of voting a secularist into power.
That was a long time ago though, and Iran has a mostly young population. What about now? Well, there's a good documentary from 2007 by the BBC called Rageh Inside Iran (video here) that shows that no, young Iranians haven't become any more conservative as a result of the Islamic government. A few screenshots from the video:





Women still have to wear the veil when outside of course, but the result is usually a style something like this with the veil as more of a fashionable scarf than anything else:

This documentary was made in Tehran and naturally other areas can be more conservative, but also keep in mind that most people in the northwest are Azeri/Azerbaijani, which are a Turkic people that speak more or less the same language as Turkish, and thus Turkey (officially secular, called laiklik in Turkish) and Azerbaijan (not very religious partly as a result of having been a part of the U.S.S.R.) have a large cultural influence there as well.
This might partly explain the immense popularity Mousavi is suddenly having now just a bit over a week before the election, because now that Cheney and thus the possibility of an invasion has been removed, the idea of a defiant president suddenly doesn't look so inviting, and Ahmadinejad is beginning to look like a bit of a buffoon. Iran's big problems right now are inflation, tons of refugees from Afghanistan, solving the nuclear issue etc. and Ahmadinejad is talking about issues that don't help Iran a bit such as his reasons for denying the Holocaust and Mousavi's wife's Ph.D. Even the Supreme Leader is irritated with Ahmadinejad for his performance in the debate.
In the meantime the Obama administration is doing everything right, IMO - they are avoiding directly mentioning the election and who they'd like to see win (that's a no-brainer), they are making some small but meaningful gestures towards Iran (inviting them to regional meetings, Iranian officials will probably be invited to the July 4th celebrations for the first time in 30 years), and they are also showing through progress with Cuba that they are capable of finding common ground with other countries that the US had been trying to completely isolate during the previous administration.
Eight days left! This election in Iran is as exciting as any American election (WAY more exciting than the last Canadian election BTW) so make sure to keep an eye on it.