The easiest way is to show you. Bookmark this page by clicking here. If you reload the page the icon should display in your browsers address field in a similar way to the illustration.
A favicon (short for "favorites icon"), also known as a page icon or an urlicon, is an icon associated with a particular website or webpage. A web designer can create such an icon, and many recent web browsers can then make use of them. Browsers that support favicons may display them in the browser's URL bar, next to the site's name in lists of bookmarks, and next to the page's title in a tabbed document interface.
The original means of defining a favicon was by placing a file called favicon.ico in the root directory of a webserver. This would then automatically be used in Internet Explorer's favorites (bookmarks) display. Later, however, a more flexible system was created, using (X)HTML to indicate the location of an icon for any given page. This is achieved by adding two link elements in the <head> section of the document as detailed here. In this way, any appropriately sized (1616 pixels or larger) image can be used, and although many still use the ICO format, other browsers now also support the animated GIF and PNG image formats. When Microsoft Internet Explorer features animated icons we'll think about producing a script which will do this for you. (Watch This Space)
Most modern browsers implement both methods. Because of this, web servers receive many requests for the file "favicon.ico" even if it doesn't exist. This may annoy web server administrators by creating many server log entries, and unnecessarily loading the disk, CPU, and network. Another common problem is that the favicons may disappear if the browser's cache is emptied.
Originally, Internet Explorer only used favicons for bookmarks, which created a minor privacy concern in that a site owner could tell how many people had bookmarked their site by checking the access logs to see how many people downloaded the favicon.ico file. However, since newer versions of Internet Explorer and most other browsers also display the favicon in the address bar on every visit, that concern may no longer be relevant.