A favicon is an essential add on to you blog or website which highlights your brand in all the right places like the browser url bar, bookmarks, favourites, desktop icons, folders and RSS news aggregators etc. (see my favicon beside the url in the location bar, or the firefox tab).
If you have purchased your own web hosting, then favicon hosting is not a problem. But if you are on a free blogging platform like Blogger, then most free image hosting services let you host jpg, gif or png files, but do not allow you to host favicons which are icon .ico files.
This service is now provided by MyFavatar which provides free hosting of favatars and favicons. A favatar is your favicon displayed on another website and is a visual representation (avatar) of a person associated with the website. A favatarZ is a social-blogmarking blogroll with favicons.
They host 32×32 PNG and ICO image that works in almost all browsers, while a 32×32 image gives you the flexibility on the size of favatar you want to display in your blog comments. Get the Favatars wordpress plugin that enables each comment / pingback / trackback to be accompanied by the website favicon. Favicon Movable Type plugin adds favicons to comments and trackbacks. Amaze your readers!