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With the advent of IE7, the favourite icon on your website is much more important than it used to be... whereas before you would rarely see a favourite icon, with IE7 it is now visible immediately on each tab that you open. The below shows you how to create a favicon in Joomla 1.0 and 1.5

To following is the easiest way to create a favicon in your Joomla website:

* Create a 16 * 16 pixel ICON image, name it favicon.ico
* Using the Media Manager (Site > Media Manager), upload and replace the default icon with your own icon

The Favicon Maker is a site which allows you to upload your image (most major formats) and converts it to stylish 16 * 16 icon image.
Favicon maker- Create a favicon from any image

Joomla 1.0.x

If you choose not to name your icon favicon.ico and instead name it xxxicon.ico you will need to change the name of the icon in the configuration (Site > Global Configuration), and change the Favicon field to xxxcon.ico or whatever the name of your icon is.
Joomla 1.5

* Upload it to your /images/ directory
* In your template directory, edit the index.php file and add the following line just before the </head> tag,

<?php echo "<link rel="shortcut icon" href="$GLOBALS[mosConfig_live_site]/images/favicon.ico" />" ; ?>