A favicon is a small image that appears alongside the url address in the left-most area of the address bar of a browser as shown below:
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When you bookmark a website with favicon, the favicon will appear beside your browser’s favourite bookmark url listing as follows:

Favicons is a must if you want to brand your site on the internet.
How to create a favicon
A favicon should be 16 x 16 pixels and must be saved as favicon.ico or it will not work. You can use the freeware IrfanView to create your favicon. In my case, I created the 16 x 16 pixels image using Fireworks and use IrfanView to convert to .ico format. For Photoshop users, you would need a special plugin to convert other image formats to the .ico format.
How to add favicon to your blog
To do this, just upload your favicon.ico file to your site’s root web directory using your FTP program . For example, if your site name is “mysite.com, just place the file inside this folder in your server.
Thereafter, you would need to place the following code between the <head></head> in your header.php file (WP Appearance/Editor):
<link rel=”shortcut icon” href=”http://www.yoursitenamehere.com/favicon.ico” mce_href=”http://www.yoursitenamehere.com/favicon.ico”/>
If you are not a technical person, you may want to download the MaxBlogPress plugin to set up your favicon in your blog. This plugin has several ready made favicon images for you to choose from. In case you do not like any of the ready made favicons, you may want to replace them with your own favicon. You can do this after you have downloaded and unzipped the plugin where you replace one of the images in the icon folder with your own favicon prior to FTP the plugin to your Wordpress plugin folder. Make sure you change your favicon file name to match the file that you want to replace in the icon folder.
Finish
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I’ll try this