What is PNG?
PNG is the web's lossless image format: compression that never degrades the picture, and a real alpha channel for transparency. It is the right choice for screenshots, logos, line art and anything with sharp edges or text.
What is ICO?
ICO is the Windows icon container, and still what a browser fetches when it asks a site for /favicon.ico. One file can hold several sizes at once so the system can pick the right one; each dimension is stored in a single byte, which caps an icon at 256 pixels.