There really isn't a formula or steps to making an icon. It really is an art. To make graphics of any size (icons are generally 100 pixels by 100 pixels) you'll need a photo editing programs like Photoshop, MS Paint, or Paint Shop Pro.
There is a site where you can edit for free: Paint.NET
I would suggest buying/downloading a program.
The most essential and basic tool for icon making would be cropping.
After you have cropped your image, you can "decorate" or "manipulate" it anyway style you like. You can change color, saturation, etc. You can add text, decorations, etc.
Save your icon as jpeg, png, or gif(this would be used for animated icons), upload it to any image hosting site like: photobucket or tinypic. Then you're ready to use them all over the internet.
The best way is to use Photoshop since they really have an unlimited creativity range of different textures, brushes, and filters you can add. However most people don't want to pay $632 (yes thats what Photoshop costs) just to make icons so they also offer Photoshop "Elements" which is a lesser version (I'm not sure what it offers, since I use the standard) I got mine awhile ago for free :p through some friends on another website (p.m me for details) because they might still have it up.
