ICO file format

Interesting snippet from freeimage :

			if(FreeImage_IsTransparent(dib)) {

				if(bit_count == 32) {
					// create the AND mask from the alpha channel

					int width_and  = WidthBytes(width);
					BYTE *and_bits = and_mask;

					// clear the mask
					memset(and_mask, 0, size_and);

					for(int y = 0; y < height; y++) {
						RGBQUAD *bits = (RGBQUAD*)FreeImage_GetScanLine(dib, y);

						for(int x = 0; x < width; x++) {
							if(bits[x].rgbReserved != 0xFF) {
								// set any transparent color to full transparency
								and_bits[x >> 3] |= (0x80 >> (x & 0x7)); 
							}
						}

						and_bits += width_and;
					}
				} 

PluginICO.cpp from FreeImage probably has all you need to understand how all the icon headers work etc.