<link rel="shortcut icon" href="/favicon.ico" type="image/x-icon" /> you should replace "/favicon.ico" in the above example with the actual location of your favicon.ico file, for example, "/images/favicon.ico" if you have placed it in your "/images/" directory.
this step is optional if you have put your "favicon.ico" file in the standard locations, ie, in the same directory as the web page or in the root directory of your website. otherwise you will need to modify all your existing web pages to take advantage of the "favicon.ico" facility.
how many people are bookmarking my website?
this "favicon.ico" used to have an interesting side-effect. the side-effect applied whether or not you bothered to put a special "favicon.ico" on your site. you used to be able to find out the number of ie 5 users who bookmarked your site by simply counting the requests for "favicon.ico" in your web server logs. from that number, you can estimate the total number of people who bookmark your site by applying this formula: number of ie 5 bookmarks divided by the fraction of your visitors using ie 5.
for example, if two-thirds of your visitors use ie 5+, and you get 100 requests for the icon, simply divide 100 by two-thirds to get 150. this was by no means an accurate measure - it did not take into account numerous factors: but at least it was able to give you a hint of how useful people find your site.
however, this side effect is no longer relevant today. mozilla, netscape and opera load the favicon.ico to display in your visitors' location bar whether they put your site in their favourites (or bookmarks) or not. apparently the mac os x browser, safari, also loads the favicon.ico file whenever it visits a site (it uses it in the history menu). i've not checked the latest version of ie so i'm not sure if it does the same too. i merely mention this "side-effect" so that you won't deceive yourself when you see the large number of "favicon.ico" requests in your web logs: it doesn't tell you that those your visitors bookmarked your site anymore.
miscellaneous matters
if you are testing your favicon file in internet explorer, and find that you're seeing an old version of your favicon.ico file, you probably need to empty your browser's cache (and possible restart the browser). internet explorer caches the favicon.ico file in the "temporary internet files" folder, so if you don't empty the cache, you'll probably continue to see your old version and not the new version that you've created. incidentally, this also means that if your visitors empty their cache, their copy of the favicon.ico file that was associated with the bookmark of your site will also be lost.