This was inspired by the favicon notifications for gmail. I'll add an exception for clients without canvas, but it should be as fully compatible as is possible.
HTML5 notifications are great for some applications, but they require the user to grant permission before receiving notifications. It solves a different problem than the favicon notification technique.
Both PNGs and ICOs should definitely work. Unless you specify a favicon in the function call, it will look for the one specified in your head. If one is not specified in your head it will use the default favicon location (/favicon.ico).
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