I came across an ICO file and since I didn't have Photoshop I had to open it in GIMP. Then I realized it has layers.
What is a layered ico file and when will I ever need it?
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.ico files are commonly used as favicons for web sites and icons in Windows. You see how there is that little GDSE icon, on the tab, in your browser?
That is called "favicon.ico" and saved in the web server's main directory, usually "/public_html".
The ICO file format is an image file format for computer icons in Microsoft Windows. ICO files contain one or more small images at multiple sizes and color depths, such that they may be scaled appropriately.
And about favicons:
A favicon...also known as a shortcut icon, website icon, tab icon, URL icon or bookmark icon, is a file named favicon.ico and containing one or more small icons, most commonly 16×16 pixels, associated with a particular website or web page. A web designer can create such an icon and upload it to a website (or web page) by several means, and graphical web browsers will then make use of it. Browsers that provide favicon support typically display a page's favicon in the browser's address bar (sometimes in the history as well) and next to the page's name in a list of bookmarks.
Essentially, your ICO file is capable of storing several different sizes of the same icon in one file. This means that you can have 16x16, 24x24, 32x32, etc. versions of your icon all stored in the one file. I'm not an expert on the ICO file format, but I imagine that this is what results in your "layers".