Hjörtur Gísli Siguršsson, curator of the Icelandic Phallological Museum explained what it's like to run such a museum in this
article (probably NSFW).
He explained how his father started collecting them in 1974, how most of the exhibits are courtesy various Icelandic mammals, how the one human penis in the museum came from a 95 year old man donated his to the museum after his death, how they have 23 specimens from elves, trolls, and mermen (most likely man-made) many of which were family heirlooms, and they have practical utensils - cutlery, lamps, bottle openers, etc.