It will automatically be detected, but that can take up to something like 72 hours for all browsers (especially IE, from what I've heard) to catch up. If you include it in the HTML (I usually just put it in my index page, or main template, but not necessarily everywhere) that will help it to go faster. I'm not sure if it helps beyond that one page, but either way it'll catch up in a couple days. I think that's usually a conservative estimate as well.
I didn't try to experiment with it. However, on all my test sites, I just put the favicon in the root. Being lazy, never got around to putting any favicon links on the pages. The favicon just came up. IE, Firefox, Opera, Chrome, and Safari - all under Win 7. Can't speak for any other browsers or OS's. But it's a good indication.