A favicon is a small image that represents your logo and business. Usually one favicon is used for each website and it will show throughout every page on the site. Plus, when a visitor saves a webpage to their Favorites (Bookmarks in Firefox) the favicon will appear.
Visit www.smashingmagazine.com to see their favicon.
Coffee mugs used for promotion have favicons…
Well not really since coffee mugs are not as geeky and technical as the Internet. In relation using a favicon is like handing out coffee mugs with your logo on it. Every time they use the coffee mug the logo should become more recognizable. That also holds true when they are perusing your website or scrolling through their Favorites and see the favicon.
Favicons are small in size but a great addition when you want to build a strong site brand.