Favicon is the icon assosciated with your website or blog which is generally displyaed in the address bar of your browser as shown below.It is generally a square size .PNG file or .ICO file of size less than 100 kb.
Now you can the choose the file which you want to add as your Fevicon.But do remember that file should be of size less than 100 KB and should be of square size.
The first fevicon is of the popular indian website www.shoutmeloud.com, the second one is of www.labonl.org and third one is of this blog emonke.blogspot.in.
To add a fevicon in your blog ,go to your dashboard as shown below
from your dashboard, click on layout and there will be the Fevicon option and click on edit.Then there will be the menu as shown below
