UPDATE: Theres an easier way to do this here: http://www.htmlcenter.com/blog/creating-a-favicon-for-your-website/.
By Mathias Kettner :
You need an image file that GIMP can open (PNG, GIF, etc.). And you need the command line tool
ppmtowinicon from the
netpbm-tools (on SuSE you have to have installed the package
netpbm). Now perform the following actions:
favicon.ppmwith raw encoding.
favicon.ppmusing the command line utility
ppmtowinicon -output favicon.ico favicon.ppm
That’s all. Now copy your
favicon.ico to the document root of Apache, for example to
/srv/www/htdocs/favicon.ico, if you are using SuSE Linux >= 8.1.