A favicon – short for “favorite icon” is an icon associated with a particular website or web page. It is generally intended to be used when you bookmark a web page. Web browsers use them in the URL bar, on tabs and elsewhere to help identify a website visually. Favicons are also used as application icons on mobile devices.
When creating favicon I would recommend using image/logo with transparent background (*.png file format image), because this icon will appear on different color backgrounds. Different browsers have different color themes. If you don’t have a transparent image file it is fine and still will do the job.
Note: Don’t use a highly detailed image as most of the time it will display at a very small size (around 16x16px) and you won’t be able to see details.
The image you will use should be 512x512px square, but just in case you don’t have such image you can use any image/logo you have and you will be able to crop it once you will upload it to your WordPress website!