Learn Spanish (Latin America): Este lápiz es mi favorito.

This is a very common trap! For masculine singular nouns like lápiz, the word for 'this' is este. The word esto exists, but it is a neutral word used only for abstract ideas or unknown objects (like saying 'What is this?'). When pointing out a specific masculine object, always use este.

How do I know lápiz is masculine if it doesn't end in -o?

Not all masculine words end in -o. Words ending in -z can be masculine or feminine, so you just have to memorize their gender as you learn them. A good habit is to always practice the word with its 'the' word: el lápiz. Because it is masculine, it uses este (this) and ends with favorito (favorite).

Why do we use es instead of está here?

We use es (from the verb ser) because being your favorite is a defining characteristic or identity of the pencil. The other verb for 'to be' (estar) is used for temporary states, feelings, or physical locations.

Does favorito change to favorita if a woman is speaking?