1. Acquire picture of sprite, methods include stealing off the internet or just running the game and hitting PrtScn
2. Open in MSPaint (I find it makes this stage a little easier) and reduce the image to a square (important) that borders the sprite
3. Zoom right in and change all background/un-wanted pixels to a single colour that isn't featured on the sprite/"wanted" pixels
4. Save as a png file
5. Open in GiMP, click [Layer -> Transparency -> Add Alpha Channel] (shortcut: Alt+L -> A -> H)
6. Use "Fuzzy Select" or "Select by Colour" tools to highlight your background, delete it.
7. Select [Image -> Scale Image] (Alt+I -> S) and under "Quality" select "None"
8. Choose a new image size (256x256 seems to work well) and save as either an ico or png file, or whatever else you want to work with