First you upload a logo. This may not exceed a maximum height of 50px. To guarantee a beautiful design, it is important that the logo has your main colors. If not, it is not bad, but not so beautiful. Upload the logo using the “Select a logo for your online shop” button.
The favicon is the small icon in the browser tab. Normally it is a minimalistic variation of the logo. This image should be square and should not exceed a maximum width of 100px and a maximum height of 100px.