Here are some of the best free icon-editing tools in the web. I’m using them to create favorite-icons for websites and cursors for windows. The programs support true color-mode (24 bits) and alpha transparency (32 bits). The standard icon-sizes 16, 24, 32, 48 are supported and you can even create a custom icon-size for large icons or transparent PNGs. The ability to create icon-animations (.ani) is also provided.
Greenfish Icon Editor Pro
This editor has everything a good icon-editor needs to have. It’s easy to use and has professional features for excellent pixel graphics. The program can open and save .ico, .cur, .png, .xpm, .bmp and .jpg files. So you can open digital photos or any kind of digital images and resize them down to your desired icon size.
A plus of this program is the ability to set a hotspot for a cursor so you can create cursors (.cur) for Windows. The editor has a large set of filters like hue/saturation, exposure, grayscale, soft blur, sharpen, drop shadow, glow, bevel and a nice gradient tool. A text-tool is also included. It even can extract icons from libraries or executable files (.exe, .dll, .ocx, .vbx, .scr, .cpl).
The zoom-capabilities of this tool range from 1x up to 20x.
Cons: No batch processing.
IcoFX is an awesome icon-editor with some special features. The program comes with standard brushes, selection tools, a text-tool and a well done gradient-tool. It can import/export .ico, .bmp, .png, .jpg and .gif files and extract icons from .exe, .dll, .ocx and .icl files. The editor has lots of nice effects like various color transformations, emboss, blur, sharpen, edges, glow, waggle, shake, drop shadow. You can even create a custom filter like it works in Photoshop! There are also other image-operations like brightness/contrast, hue/saturation, color balance, opacity, fadeout and shadow. This palette provides every possible effect you will need.
The program has also the ability of batch processing so you can create icons from a stack of images in one pass. There’s also the option of creating an image/icon from a screen capture.
The zoom-levels range from 100% up to 1000%.
Cons: No cursor-creation (.cur). The maximum zoomed in workspace-size is smaller than in the Greenfish Icon Editor Pro.
Sibcode Icon Plugin for Photoshop
The Sibcode Icon Plugin is a small plugin for Adobe Photoshop (it even works with Photoshop Elements) which lets you save your images as valid .ico-files. It supports different color resolutions up to 32 bits (alpha transparency).
This plugin is a good alternative to professional icon editors if you own Photoshop. You can use all the photoshop-tools and as the plugin supports transparency you can create complex icons for Windows XP or Vista.