Last day I designed some icons for my desktop. When I tired to save them as *.ico in Photoshop, I realized there is no ICO format for Photoshop. Then I found this plug-in. To make it work, just download it and put plug-in file into C:\Program Files\Adobe\Adobe Photoshop CS3\Plug-Ins\File Formats folder and restart Photoshop.
You can download it from telegraphics web site.