You can convert pictures (having .png .jpg .jpeg .tga .bmp & .gif extensions) easily by using couple of softwares
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first you need to resize your picture to the size you desire/require for your icon (use freeware IrfanView for resizing) , after doing so you just need to convert your resized image to an image type which is recognized by Windows (XP & 98) as icon (that's .ico) , for the conversion of images having extensions as stated above I would suggest you the freeware ToYcon , it also offers the conversion of PNG's into icons
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Good Luck 