FAVICON ICON
BIG
WELL, IT IS FOR ITS SIZE!
What's a favicon icon? When your web site is listed in someone's Favorites bookmark list, it's described by your main page title; a favicon is the tiny logo that sometimes appears next to it.
If you have Internet Explorer, Firefox or a browser like Mac Safari, look at your bookmarks now and you'll probably see a few favicons. Favicons sometimes appear in the address bar as mini logos, whether the site is bookmarked or not. The logo is well worth having.
FAVICON stands for FAVorites ICON. It's a miniature marketing logo - knee high to a shirt button, but it does get noticed.
Try bookmarking this page now and my favicon owl may appear in your address bar or your Favorites list. (It doesn't?
... No need to worry. Read on...) To create this little logo, it's easy at this tiny size to design a graphic and save it as an icon. (Important warning. Just don't try reducing a photo to 16 x 16 pixels! You'll end up with a blob. You need to draw your icon.) Then you just load it in the root folder of your website.
It's ready to be found.
DESIGN YOUR OWN MINI-LOGO
Icon files can hold several images at different sizes and colour depths. The new Mac desktop icons can exceed the dimensions of an entire mobile phone screen, and have special masks for subtle shadows and transparency. There are dedicated icon editors to create these increasingly complex files for desktop display.
If you've written a new application, or want to make desktop candy for your PC or Mac, you may like to download a trial run of a pro icon editor. But a favicon usually only appears in a browser. It's a tiny Bookmark, History list or Address Bar symbol, and really only needs to include a single image.
For a perfectly serviceable favicon, you just need 16 x 16 pixels and 16 colours. You can make the graphic in Photoshop or Photoshop Elements, Irfanview or even MS Paint. With Adobe GoLive you can make a more elaborate favicon from Photoshop layers. No need for pro editors.
You can try saving your icon as a .BMP file and then simply renaming it as an .ICO file. Or you can use art software to convert your finished image to an .ICO file. Irfanview for a PC or Graphic Converter for the Mac do the job for peanuts or nothing and unlike specialised icon editors, have a host of other uses.
You won't achieve a transparent background with this DIY method. (That is, your logo will be a square of solid colour, not a cutout.) But a square of colour stands out. You won't waste a pixel of your precious space, and besides, if squares are okay for Google and Wired Magazine, who's worried?
Here are a few bookmarks in the Mac Safari browser. Individual favicons can stand out even more in a longer list where most are simply marked with the regulation globe.

Favicon has the reputation of being fickle in Internet Explorer, and here of course you're dependent on the user bookmarking you. It's difficult because you can't do too much testing to find what makes this midget Pimpernel appear and disappear. You only have your own computer to try it on. Sometimes a recipient can clear their cache, or your logo can disappear for other reasons. Just as mysteriously it can reappear.
Never mind. If your marketing logo is distinctive enough, even if it disappears it has probably done its work. We learn to recognise images faster than words. A really striking favicon won't be forgotten.
Good luck! ... 
Making a favicon the easy way... 
Favicon icon. Make your own mini marketing logo.