First of all you need to have an icon 57 x 57 pixels in the PNG format. It's always better to create the icon in the high resolution as you'll need a bigger version (512 x 512px) for Apple AppStore artwork.
The 57 x 57 pixel icon used to represent your application on the device home screen. This icon should not contain any glossy effects. The system adds those effects for you automatically. This file is required.
If you are distributing your application to local users using ad-hoc distribution (instead of going through the App Store), your bundle should also include a 512 x 512 pixel version of your application icon in a file called iTunesArtwork. This file provides the icon that iTunes displays when distributing your application.
Once your app icon is ready in 57 x 57px and is called Icon.png, right-click the Resources folder in XCode, Open "Add" submenu and select "Existing files ...". Select your icon and click "Add" button. On the next screen, make sure that the "Copy items into destination group's folder" (if needed)" is checked and again click the "Add" button. Now when your icon is an official part of your iPhone application, search the "Resources folder" for "NameOfYourApp-Info.plist" file and double-click on it.
You'll see a window like that:
Edit the "Icon file" field and put the name of your icon in it (it's just Icon.png in our case, no path or anything like that).
Now if your application file is a valid PNG file you can run your Application in simulator or on the device and once your App is closed you'll see your app with your brand new amazing icon :-)
