How to create a favicon.

Part 1: Set up Photoshop.
1. Close Photoshop
2. Download this zip file: ICOformat.zip and unzip it. Or, find it at T:/shared/ICOformat.8bi
3. Place this .8bi file in: C:\Program Files\Adobe\Adobe Photoshop CS4\Plug-ins\File Formats. Remember, just copy the ICOformat.8bi file and paste it in the correct Photoshop file.
4. Great. Now you're done with favicon setup in Photoshop. Now you can open and save proper .ico files.

Part 2: Create a proper favicon.
1. Open Photoshop
2. New. Indicate the size 64x64 at 72 dpi. Remember, only RGB.
3. Now create your favicon. When done, save it (this is important) in your root directory as, duh, favicon.ico

Part 3: Call it up in your code.
1. Place the following line of code in your HEAD portion.
<link rel="shortcut icon" href="favicon.ico">
2. Save your .html file and test it.

Please note: It will work instantly with Firefox 3.6. It will only work with IE 8 if you test it via a webserver.