Im confused!!! help with .ico and .png

Im trying to customize my windows 7 icons. I've read that windows 7 uses .png for icons, but when i try to use a png file for an icon it doesnt work. I know you can convert them to .ico files and that works,(axialis iconworkshop) but those files are larger where the png file is smaller. Also, when I download icons, some include both png and ico files. So can you use png files on windows7 for icons? If not then why do sites on the internet say that windows does use them? Or does windows store it as png on the HD then convert them to ico when needed? I just want the icons i change to look as good as the ones that are there by default......im confused

I haven't messed with icons in a while, but I thought the png files were for editing, and then you could save them to .ico to actually use. I can't remember the app, but I have all my custom icons saved to a .dll file.

You can make them anything that you want for free with Irfanview.

boohbah said:

I believe an icon is just that and when changing a folder icon for example you must use an icon.
png 's as icon only tend to work in objectdock and other similar apps i may be wrong but in my experience this has been the case you can also use ico fx to convert png to icon also it can be used to convert mac icons to windows icons
IcoFX - The Free Icon Editor

That's the program that I use to convert pictures to .ico and it works great.