Create an icon file called "favicon.ico", it has to be a 16-pixel square icon file use no more than 16 Windows colors. Use a Windows icon program, or use a converter to use an existing graphic by converting it to the 16x16 pixel icon. When you have made your icon file, upload it to each folder of your website so Internet Explorer can find it.
You can download an editor from here:-
http://http://www.snidesoft.com/
If you want the icon to appear in the address line in IE, once you have created your icon and saved it as favicon.ico then save it again as another name, something like page.ico and upload both to your server. Then put this code in the header tags on all your pages:-
<LINK REL="SHORTCUT ICON" HREF="http://www.mydomain.com/page.ico">
It should appear in the address then, incidentally, if you use Firefox, it is automatically displayed in the address bar.