The shortcut icon is a tiny little picture that is usually shown up in the address bar. Sometimes it is also used in your Bookmarks/Favorites. Some browsers let you use .gif files, but to be completely safe and have all browsers see your picture, you should use a .ico file. The words "SHORTCUT ICON" are not case sensitive (you are able to use lowercase if you want). Also, you can use a relative address instead of a fully qualified URL.

Use just one of these, whichever one looks like what you want.

<link rel="SHORTCUT ICON" href="http://your.site.com/the_icon.ico">
<link rel="shortcut icon" href="/my_icon.ico">

Also, if you get mysterious hits for a "/favicon.ico" or similar on your web site, that is because the default image for a shortcut icon. If you include this tag and point to a valid icon, then your web server logs won't show the 404 errors for favicon.ico anymore.