Favicon.com is a simple online tool that allows you to create a favicon for your site quickly. It just takes 4 steps!!!. Upload the image from which you want to create a favicon, crop it, and it gives you a live preview of how your favicon will look like. Then download it and use it on your site. Not very professional but simple if you don’t want to pay heavy prices for making it.
If you are looking to create round-cornered images, read the Free Online tool for giving images round the corner and download it
I am using free tool at animatedfavicon.com. This one works great and its fast