(There's no video for Icon Machine 2 yet. Please contribute to MR and add a video now!)
Icon Machine is like a miniature Photoshop made exclusively for icon editing. Icon Machine can edit all icon sizes (from the classic era) in 8-bits (256 colors) and also lets you apply the icon you're drawing on files. You can use gradients, mask and many tools you'd be expecting to see in a drawing application.
Icon-Machine.sit (698.33 KiB / 715.1 KB)
Icon Machine v2.0 / compressed w/ Stuffit
Architecture: 68K + PPC (FAT)
At least 2.5MB of free RAM (recommended 3MB)
Mac OS 7.x - Mac OS 9.2.2
Emulating this? It should run fine under: SheepShaver