The favicon also comes into play if you bookmark a webpage.  The custom icon will appear in your bookmarks list, or on your desktop if you drag a page there.  This is what the favicon is all about.

Tonight it dawned on me that any program that create ‘applications’ out of webpages, also use that favicon file as your desktop icon.  In this case I’m using Google’s web browser Chrome to create an ‘application shortcut’.  The application shortcut that Chrome creates is essentially a chromeless browser that goes directly to the url you specified.  When this shortcut is created on your machine it uses that site’s favicon.ico if one exists.

So there you go.  One more reason why you should always have a custom favicon.ico for any webpage you are in charge of.