[WallyFunk]

If the original image is a vector/SVG then it should look well scaled down. I think you can have SVG graphics for a favicon.

[gampleman]

This won't really work super well for massive downscaling. If you have a vector image designed with enough detail to look good at large resolution, the smaller version will not look great and not be easy to see (apart from being also massively inefficient).

[verdverm]

this is the way!