First Create Your Image
Using a graphics program, create an image that is 16 x 16 pixels. Save the image as a GIF or BMP file with 256 colors or less. Icon files can't reliably display millions of colors. However, since an icon file is for Windows displays only, it can be 256 colors, rather than the Web standard 216.
Converting an image to an Icon
There are many icon editors available that can be used to save the file as favicon.ico.
Displaying the Icon
In order to display the icon you simply need to upload it to the same directory as the file you want bookmarked.
You can also put a different icon on every page of your site, or point to one icon in many folders. To do this, you add a link reference to the head of every HTML document that you want. e.g.
<link rel="shortcut icon" href="path to icon/favicon.ico">