I can't seem to find this info anywhere, I was wondering what the limitations are for advertising something while using this word - especially within a URL. (does the W3C own the word??)
If it had trademark status, it would be owned by Microsoft, not W3C, as they were the ones that developed the feature (and I believe the word). It was originally used only in IE for favorites (hence the name). It wasn't until later that it was used in the address bar by IE and other browsers. Microsoft does not have a registered TM in the US. It could be said that it is a common-law mark, but I think it has become a common usage term (which would limit or eliminate any protection for the term). I am not a lawyer, that is just my opinion. I'm not sure that it could be trademarked as it is basically a descriptive term, but a non-computer-savvy judge might not see it that way. However, Microsoft has links to outside pages and resources that not only are about favicons, but cotain the term in the URL. Since they would have the rights (if there were any to be had) and they don't have a problem linking to such sites, I don't think you'll have issues.
Chances are slim that the term is trademarked. If a dispute arises, the evidence is overwhelming that the term is generic. Pretty much every reference to the concept uses that term. Of course you wouldn't want to have to be the one to have to prove this in court. Still, I'd say using the term is low risk.