Open a favorite image that you like to turn into a favicon to appear in your browser's location bar
Click Image->Mode->RGB
Using the erase tool, erase any areas of the graphic that you'd like to be transparent
Using Image->Scale, resize the image to 32x32, the proper size for a favicon
First save the file as a GIF
Select * Convert to Indexed using default settings
Click Export
Save a copy as .ico.
It will give you a number of choices for bits/pixel: 1 bpp, 1 bit alpha, 2-slot palette 4 bpp, 1 bit alpha, 16-slot palette 8 bpp, 1 bit alpha, 256-slot palette 32 bpp, 8 bit alpha, no palette
