Greenfish Icon Editor Pro (aka GFIE Pro) is a powerful open source icon, cursor, animation, icon library and image editor. It can be used to create Vista compatible icons up to 256×256. It has a variety of drawing tools and filters. It can open/save ICO, PNG, CUR, BMP, BMP, GIF, JPEG, ANI files and animated cursors.
A tutorial for converting pictures to icons can be found on Instructables.
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Pro Windows and Linux versions
As it's developed with Lazarus.
Pro Open source
Written with the free Lazarus (open source Delphi like) development environment, the Greenfish Icon editor source code is included in the download.
Pro Portable version and many languages
Because of all the advanced functionality this is not the easiest icon editor, so beginners might prefer a more limited simple icon editor.
Con Dependency upon Python2
It is not a 100% deal breaker but Python2 has been left behind without compunction. The average person downloading this will not have Python2. So it will not install nor run. If it could be statically linked or migrated, then maybe.