A favicon gives a website its own identity and uniqueness on the desktop.In this post I will tell you how can you create favicon from a already exsisting image.
The favicon generator tool by Dynamic Drive will allow you to easily convert images to favicon.Visit http://tools.dynamicdrive.com/favicon/ select the image file by using the browse button and click create.

You can also create transparent icons and of the sizes 32×32 and 48×48 .The Maximum File size allowed is 150 Kbs.

You can click the Download “FavIcon” button to get the favicon.
To places your icon ,place the following code in the head section by editing the header.php (for wordpress)
<link rel=”shortcut icon” href=”iconfolder/favicon.ico”>
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i knew of another tool doing this but this seems cool… thx for the tip!
There are a lot of favicon generators and some even offer to design your own favicon.
you can even make it in photoshop or fireworks by saving a file in .ico format and resizing it to 16 by 16 or 32 by 32.
I am using free tool at animatedfavicon.com. This one works great and its fast