Here is a mysterious case of the icon overlap problem, which the screenshot below explains perfectly. You can see the original icon for shortcuts are overlapped by a generic white icon, which is shown for unknown file types. An incorrect Icon Overlay setting is causing the problem.
As the issue is seen only for shortcuts (.lnk and .url files), the problem is with the “Shell Icons” registry key which you can use to hide or change the arrow icon for shortcuts.
For a proper method to remove or modify shortcut arrow icon overlay, read article How to Remove or Modify the Shortcut Overlay in Windows.
And here is a variation of the same issue, but this time a black box is covering up the shortcut icons. This can happen if the blank icon within shell32.dll (,50) is used in order to remove the shortcut arrows.
Here is the particular registry key you want to check out.
In the subject computer, the value named 29 in the above registry location was pointing to the following .ico file:
Presumably, a software called “WinBubble” was used to change the icons, and later the user removed the program — making the .ico file path invalid. The invalid reference causes the white icons (or black boxes) to show up as the shortcut overlay.
To remove the overriding registry value, start the Registry Editor (Regedit.exe) and go to the “Shell Icons” branch mentioned earlier.
Delete the value named 29 and restart Windows.
This should resolve the problem.
About the author
Ramesh Srinivasan founded Winhelponline.com back in 2005. He is passionate about Microsoft technologies and has a vast experience in the ITeS industry — delivering support for Microsoft's consumer products. He has been a Microsoft MVP [2003 to 2012] who contributes to various Windows support forums.