The following Haml will do:

%head{ :profile => 'http://www.w3.org/2005/10/profile' }
  %link{ :href => image_path('favicon.ico'), :rel => 'icon', :type => 'image/vnd.microsoft.icon' }

Growing Rails Applications in Practice

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Note that while you can link to icon formats other than .ico, Internet Explorer is too stupid for that.