The many-body dynamics resulting from I-2 photodissociation in solid Ar are investigated using a combination of time-resolved pump-probe measurements and molecular dynamics simulations. The wavelength dependence of the signals, measured with a time resolution of 120-150 fs, are reported. Polarization experiments indicate that, for the duration of observation, the photodissociation-recombination proceeds adiabatically. Molecular dynamics simulations, combined with the classical Franck principle, are employed to calculate simulated signals, which agree well with experiment. The microscopic dynamics of the system are then investigated by examining individual trajectory data in detail, giving an atomic-scale view of the photoinduced dissociation of I-2 on the A excited electronic surface, the subsequent caging of the photofragments by the lattice, I-2 recombination, and coherent vibrational dynamics of the nascent diatomic molecule. Recombination is found to be a dynamically complex process, involving bidirectional energy flow between molecule and lattice during the early time motion of the photofragments in the solvent cage. The recombination event, when defined as the permanent deexcitation of the I-2 below its dissociation threshold, is not directly associated with any prominent feature in the pump-probe signal.