Note that the favicon can be changed only when you have the Branding free feature activated.
What is a favicon?
It is a small icon (usually 16x16 pixels) shown next to the webpage title in each window/tab of your browser.
All you have to do is to log in to the merchant panel and navigate to:
Configuration > Design > Customize log (tab)
and there you find the "Favicon" section where you click the "Change image" button and look up your favicon image and hit Apply.