Not only is it absolutely free it’s also fairly regularly updated and packed with features. You can easily import graphics from anywhere (even dll’s and exe files) on your computer and turn them to icons, furthermore it creates a set of icons in various sizes/formats when you save your work. Full support for transparency (alpha channel) and more than 40 effects/filters makes this a great time-saver for those extensively using/working with icons.
IcoFX is an award winning freeware icon editor. It is an all-in-one solution for icon creation, extraction and editing. It is designed to work with Windows XP and Windows Vista icons supporting transparency.