By Rosario Almaguer.

SharePoint 2010 comes with a orange Favicon and it's present in SharePoint Root Folder\Template\Images [eg. C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\14\TEMPLATE\IMAGES\]. Open this folder and search for favicon.ico and rename the file to FaviconBackup.ico. Now copy your favicon to this folder and make sure it's named as "favicon.ico", you can change the name of you favicon [eg. MyFavicon.ico]. Now restart IIS(open Command Prompt -> IISReset), clear browser cache/temproary internet files. Close the browser and reopen then browse the SharePoint site.

In SharePoint Designer 2010 select Master Pages, then select the master page that will show the new favicon. Now click “Edit File” link to add the favicon code. If it asks for check out, click yes and continue.

Find <SharePoint:SPShortcutIcon ID="SPShortcutIcon1" runat="server" IconUrl="/_layouts/images/favicon.ico"/> and change the name of the favicon. Save and close (If you have checked out then you need to check in and site collection administrator has to approve it via Site Settings -> Galleries -> Master pages and page layouts -> Check in and Approve). Now reset IIS/clear browser cache and check.

If mulitple sites are hosted in same farm and need to set different favicons for different sites then we have to update Master Page Code. Open the site with SharePoint Designer 2010 and select Master pages -> v4.master. The default.master is still present in SharePoint 2010 for backward compatibility and visual upgrade. But SharePoint 2010 uses v4.master only. Now click "Edit File" link to add the favicon code. If it asks for check out, click yes and continue.

Find <SharePoint:SPShortcutIcon ID="SPShortcutIcon1" runat="server" IconUrl="/_layouts/images/favicon.ico"/> and change the path of favicon. Save and close (If you have checked out then you need to check in and site collection administrator has to approve it via Site Settings -> Galleries -> Master pages and page layouts -> Check in and Approve). Now reset IIS/clear browser cache and check.