First you need one of the software applaications to build the graphic.
And after you made the icon, there are two options:
-Store it as 'favicon.ico' in the root of your domain
-use special html tag <link rel="shortcut icon" href="./favicon.icon">. That works even if you don't have access to / on your domain for whatever reason.
Donationware Photoshop Plugin - outputs .ICO format, download and drop the plugin (.8bi) intoyour photoshop/plugins/file formats directory to be able to save files as ICOs
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Relevant notes:
At the time of writing this FAQ was ranked number 2 at Google for the terms make, an, icon.