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The Hall of Armor is shown several times in the background during the film. At this point, it houses the Mark I armor that was collected by the Ten Rings and housed in Stark Industries for some time], the Mark II prototype armor, the Mark III armor that was damaged during his battle with Stane and the explosion of the Arc Reactor, and his current Mark IV armor. The Mark V "briefcase" armor did not have a spot here.
During Stark's birthday party, James Rhodes entered the Hall and took the Mark II armor, along with a spare mini-arc reactor. After a brief skirmish with Stark, Rhodes stole the armor and it was used as a basis for the War Machine.
After the events of Iron Man 2, Tony built the improved War Machine Mark II armor for Rhodes. He took the original War Machine armor, stripped it of the weapons and modifications added by Justin Hammer, and returned it to its display in the Hall between the Mark I and Mark III.
The Hall of Armor consists of several floors now, the top of which is in Tony's garage and features alcoves housing the Mark I through the Mark VII . The alcoves face a central platform which is an elevator that descends into an area known as the "cellar", which is actually Tony's wine cellar.
On the floor of the cellar is a mechanical iris that descends further beneath the house, into the rock face of Malibu Point. This iris hides a cylindrical chamber, lined with alcoves for housing the Iron Man armor from Mark VIII through Mark XLII.
When the house is destroyed in an attack by the Mandarin, the first seven armors are destroyed, and the cellar is covered by debris. When the cleanup crew finally unblocks the mechanical iris, J.A.R.V.I.S. opens the iris, powers up the Mark VIII through Mark XLI armors, and deploys them all to Miami as part of the "House Party" protocol.
The cellar - and thus, the Hall of Armor - was eventually destroyed following the complete safety demolition of the house. Tony returned to throw his now-inactive Arc Reactor into the ocean off of Malibu Point, where it sank to the bottom along with the wreckage of his house.