The blurry tab icon nobody notices until it's their own site
You add a favicon to a website by just renaming a PNG logo to favicon.ico and dropping it in, and it mostly works — until you notice the browser tab icon looks slightly soft or oddly cropped compared to how crisp it looks everywhere else. This happens because a single image file gets stretched or squeezed to whatever tiny size the browser actually needs, and that scaling rarely looks as sharp as a version actually made for that exact size.
A proper .ico file solves this differently: instead of one image getting resized on the fly, it bundles several pre-made sizes together in one file, so the browser picks the one that's already the right size instead of scaling anything.
Why one file can contain multiple images
This is the part that makes .ico genuinely different from a normal image file: it's a container format that can hold several separate images at once — commonly 16, 32, 48, 64, 128, and 256 pixels, all in a single .ico file. A browser tab needs a tiny 16px icon; a desktop shortcut or app icon needs something much larger; a proper .ico gives each context its own dedicated, pre-rendered size rather than making one image do every job.
This is also why simply renaming a PNG to .ico doesn't really work the way people expect — it technically loads in some contexts, but it's still just one size being stretched everywhere else, missing the entire point of the format.
Why your source image should be square
Since every size generated inside the .ico is rendered as a square, a non-square source image gets stretched or squeezed to fit — which is where a lot of favicon attempts go visibly wrong, especially with wide logos that have text next to a symbol. A square source (or an image with the actual subject centered and enough padding around it) produces a clean result across every generated size, while a wide rectangular logo crammed into a square almost always looks off.
If your only logo file is a wide horizontal lockup, it's usually worth isolating just the icon or symbol part of it — square on its own — rather than forcing the entire wordmark into a 16px square where the text becomes illegible anyway.
The modern format underneath, and what it means practically
Today's .ico files typically use the PNG-embedded format (supported since Windows Vista and universally by browsers) rather than the older raw bitmap-based format — each size inside the container is stored as a regular PNG image, which is simpler, more broadly compatible, and easier to generate correctly than the legacy format's more complex structure.
Practically, this means a well-built favicon converter today doesn't need to worry about decades-old bitmap compatibility quirks — it just needs to render clean PNGs at each target size and package them correctly into the container.