Adding a custom icon is pretty simple, follow these instructions below.
1. Create your icon and be sure it's small enough to load quickly
a. PNG files are the best, and no larger than about 60k
2. Right click on the Placemark you want to change the icon of (fig. 1) and go to 'Properties' (Get info...' on a MAC)
Fig. 1
3. In the next dialogue box, click the small pin icon (fig. 2)
a. This is also where you could add any additional information to the placemark under 'Description:'
Fig. 2
4. Here are a list of default icons that you can use, or click on the 'Add Custom icon...' button
a. you can also choose 'No Icon' if you want just a label with no pin or anything
Fig. 3
5. After choosing 'Add Custom icon...' you are prompted to give your custom icon location. Click 'Browse...' (fig. 4) and find your icon on your hard drive.
Fig. 4
Once you choose a custom Icon from your hard drive, it will show up in the default icon list for easier finding int he future.
6. This will make the placemark into your custom icon. (fig. 5)
(Fig. 5)
7. When you are saving this Placemark out, you must save it as a KMZ, not a KML, or the custom icon will be lost.
NOTE: from now on when you add a placemark, it will default to the last one you chose, in this case the custom icon. To change it back to the yellow pin (or anything else) follow steps 1 - 3 and choose the yellow pin from the list of default choices.