Adding a favicon to your site:
FAVICONS 
Notice the red “Y!” symbol that appears in the left-most area of the address bar in Internet Explorer screenshot below. This is Yahoo’s favicon. These favicons (favorites icons), sometimes called “bookmark icons,” appear after adding a website with a favicon to the favorites menu in Internet Explorer and certain other browsers.
plugins to create favicons: http://www.telegraphics.com.au/sw/
ico generators: http://www.chami.com/html-kit/services/favicon/
Directions:
- Create your graphic in Photoshop or Illustrator
- When you are done designing, crop to 32x32 or 16x16 pixels
- use unsharp mask to sharpen the image up (optional)

- Using the ico plug-in listed above to save it for the web or save as a .png file (upload it to the server)
- Add the following code to the head tag on your index.html page of your site:
Below are 2 ways to add a favicon to your site. One using a .png file the other is using a .ico file. For a .ico file you need to download the plugin from: http://www.telegraphics.com.au/sw/
To install on Windows:
- Move the plugin into the "File Formats" folder
inside your Photoshop Plugins folder:
- On Windows, ICOFormat.8bi
- On OS X/Classic, icoformat (CS2/Mac version is ICOFormat_cs2.plugin)
- On 68K MacOS, icoformat(68K)
- Quit and relaunch Photoshop, if it's already running.
To use the plugin
- Use Photoshop's Open command (File menu) to open .ICO files (which will now appear
in the file browser)
- Use Photoshop's Save command to create .ICO files
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Then follow these instructions:
1. http://www.w3.org/2005/10/howto-favicon
Add this to the head tag of your html page:
<link rel="icon" type="image/png" href="favicon.png" />
or...
2. Add this to the head tag of your html page:
<link rel="shortcut icon" href="favicon.ico" type="image/x-icon" />
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Some examples of current favicons on the web:

More articles on creating favicons:
http://www.photoshopsupport.com/tutorials/jennifer/favicon.html
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Some favicons I made, started out like this:



Then resized to 32x32px:

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