Your favicon must be created elsewhere and then uploaded to the site. There are multiple sites online that will generate a favicon from an image file for free.
Once you have uploaded your .ico file to the server and know its location, you'll need to edit the file located at:
[cartlocation]/templates/[yourtemplate]/Panels/HTMLHead.html
Now you'll need to know your favicon HTML, which is usually something like:
<link href="[yourpath]/favicon.ico" rel="icon" type="image/x-icon" />
You'll need to put that with the other link tags directly BELOW the line:
<link href="%%GLOBAL_ShopPath%%/admin/Styles/iselector.css" type="text/css" rel="stylesheet" />
You should now have a favicon on every page in your store. The admin control panel's favicon is located in the admin folder. If you want to change it, just switch out your favicon with the favicon.ico file located in that folder.

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