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For those who don't know what Favicon is 'Favicon is a small icon(image) displayed at the beginning of the address bar of the browser.It is also called Favourite Icon,Pageicon and urlicon.

The main advantage of creating and using favicon is ,it makes it easy to find your blog or site when someone favourited or bookmarked your site/blog among several other sites.

Most of the people use 16*16 pixel favicon(you can also use 32*32 pixel favicon) with ".ico" format.But,you can also use gif,png(image formats) aswell.

How to add Favicon URL
Now,go to your blogger dashboard>layout>Edit html

Find This Code
<title><data:blog.pagetitle/></title>

and add the below code just after the above one

<link href='ICON FILE URL' rel='shortcut icon'/><br /> <link href='ICON FILE URL' rel='icon'/>

and replace the 'ICON FILE URL' with the url of your icon file

Now See your favicon..^^
Video : How to add Favicon to your blog