The login page will redirect to the favicon if the user is already logged in, or it will serve a regular HTML page if the user is not.

So, the script creates an (invisible) <img> element for every website which points to the login page (which might redirect to the favicon). If it receives an image, the user is already logged in and the onLoad() callback will fire. Otherwise, it will get an HTML page, so the onError() callback will fire.

It could work with any image on the website, not just the favicon.