SharePoint Framework solutions offer Client Side Webparts and SPFx Extensions to add custom functionality to your SharePoint sites. When we package these components, they are bundled as a SharePoint Framework App Package with an extension .sppkg. These packages are installed (like the SharePoint Add-Ins) and shown as custom Apps in your Site Contents page. Showing a custom App Icon on this page for your App is important, as it can differentiate your App easily from other custom ones.
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Create an AppIcon image
Prepare your AppIcon image with a dimension of 96X96. This is important, as images without this dimension are not applied as App Icons.
Set the Image as App Icon
- Copy the image to the sharepoint folder within your SharePoint framework solution directory.
 - Open the package-solution.json file from the config folder and specify the App Icon using the iconPath property. (this accepts a path relative from the sharepoint folder).
 - Build and package the app using gulp bundle & gulp package-solution commands.
 - Add the app to your App Catalog and install in a site collection. The App will now have a custom App Icon.
 
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However, this icon is not used in the Modern Pages, and only shown in the Site Contents page on a Classic view.
Its also a good idea to show a custom icon for client side webparts within your SPFx package. Steps to do this in my next post - SharePoint Framework: Set custom icons for Client Side Webparts