A Windows bitmap image (.bmp) is not the same as a Windows icon (.ico).
The .ico file format contains several images and while the individual images may be stored in roughly the same way as a .bmp file, there is an important header at the beginning of the .ico file, which is missing in a .bmp file.
It is a widespread myth that it is possible to safely rename .bmp files to .ico files, but it is not true. While it may occasionally work, this is purely a coincidence. Applications, which are able to read both .ico files and .bmp files, will sometimes ignore the extension and use the file despite the wrong extension (Firefox is a typical example).
Particularly web masters trying to create a favicon for their web site are prone to take this shortcut and then wonder why isn't their favicon.ico working in Internet Explorer.
To convert .bmp to .ico, use a dedicated tool:
Find out how Vista icons differ from XP icons.
See how RealWorld Icon Editor handles Vista icons.