It’s possible to add favicon to your blog as many top-websites have such as Google have “G”, MSN have their butterfly and blogger have a “B” by default. So, you can change it using the following trick. Not actually a trick but a website called myfavatar hosts favicons of blogs and sites for free. So,we can use their free service.
First of you will have to create an image (preferably 50×50) using photoshop, powerpoint or any other application you have. After creating it save (animated GIF’s are not allowed) and upload it on MyFavatar. They will provide you with HTML code and you will have to insert it in the header section of your template.

However the above image refers to my another blog(Musicalblast) as I haven’t applied favicon to this one.
Now, whenever you see at the address-bar the image will appear instead of default blogger.
I will prefer the first alphabet of your site name as I have “W” for webdale. You can also have your personal photo-snap for personal websites like this.