Despite Windows provides some ways to customize folder look since Vista, it doesn't allow you to apply anything but the ICO format. Quite frustrating, as such a limitation requires us to either convert an image to the format Windows understands, or to grin and bear it. Or is there another option?
Yes! FolderIco fixes the problem by simply allowing you to use any PNG picture as a folder icon. Here is how you can do this.
Provided FolderIco is already installed, right-click any folder you want to assign a PNG picture to and choose "More Icon" submenu. This will open a dialog where you can select multiple supplied icons to assign to the folder.
Scroll through the library to find the image you want and apply it instantly. However, FolderIco gives you an even more powerful option.
Switch to the "Load" category at the left side and click the "Load Folder Image" button. Browse for the PNG image you need and add it to the library. Now, just set this newly added picture as an icon for the folder. That's it!
You don't have to convert formats or do anything beyond this simple tutorial to use a PNG image as a folder icon. The program does everything for you!