What is a Favicon
This little icon allows you to place your company logo or corporate brand in the browser address bar. Not having one of these will not have a direct negative effect on your search rank, but it does make your website look well maintained and more "hip" when it does appear. Ultimately happy or impressed visitors will increase your chances of getting inbound links and social links, positively influencing your search rank long term.
Form more information on Favicon, click here.
Adding One To Your Page
After you create your icon, adding it to your page requires you to add a small block of HTML to each page on your website:
<link rel="shortcut icon" type="image/x-icon" href="/favicon.ico">