There's a better way to do this.
Originally Posted by kiab
1: Copy the "head.php" file from "/plugins/system/jat3/jat3/base-themes/default/blocks" to "templates/your_t3_template/blocks"
2: open it up and look for the following line:
3: Replace it with this line:
<link href="<?php echo T3Path::getUrl('images/favicon.ico') ?>" rel="shortcut icon" type="image/x-icon" />
Note that ja_t3_blank should be replaced with the name of your JA T3 folder's name.
<link href="<?php echo JURI::base(true)."/templates/ja_t3_blank/favicon.ico"; ?>" rel="shortcut icon" type="image/x-icon" />
3: Place your custom favicon file to your template folder; "templates/your_t3_template/favicon.ico"
This way whenever you upgrade your template to a newer version, it doesn't undo the change you made.
Hope this helps.