By default, the Joomla! favicon.ico file can be found in the /images directory. Some templates, however, will contain code that redirects the browser to /templates/template_name/icon. To determine where your new favicon should be, examine /templates/index.php and look for code that resembles:
<link rel="shortcut icon" href="http://yoursite.com/templates/your_template/icon/favicon.ico" />
Alternatively, modify the index.php for the template, so that it uses your preferred name.ico file.
Editor's note: The above is not quite accurate as Joomla! will look for the favicon.ico file in the template directory automatically too. The above statements need checking and re-wording.