Back in the OS/2 days, I used to make icons like crazy. On OS/2, the sizes were 20x20 and 40x40.  On Windows they were 16x16 and 32x32.

You could use a free icon editor or buy fairly good icon editors that let you edit the icons pixel by pixel.

In Windows XP, things started to change.  Now icons could be alpha-blended and they could be up to 128x128.  Making a 128x128 icon is a whole different discipline than making a 32x32 icon. One is pixel art, the other involves some serious graphics design.

I can't make a 128x128 icon that's particularly good and neither can most other people -- even many who could create quite nice 32x32 icons.

In Windows Vista, Microsoft did two more things -- they allow users to view individual folders with icons at different sizes and they made all the icons nice enough to encourage people to have their icons at higher resolution. 

In addition, Microsoft made the default format 256x256.  In fact, if you don't make an icon 256x256, then the icon will be displayed as a rather weird looking tile on the desktop with the icon in 32x32.  This is true even if there's a 128x128 -- it won't even scale them up!

It's really changed the way we look at how to make icons.  Are there any other old icon makers here or current icon makers? What do you think how things have evolved.  It's been quite a journey!