According to this question on Meta.StackOverflow:
Changes to the question will now notify users who have favorited the question. Notifications include comments to the question, edits, new answers, and edits to answers. This is a way to get updates on questions that you yourself didn't ask.
The answer does not explicitly state where the notifications appear, although I assume they would appear in my Stack Exchange inbox. However, I have not once received a single notification for any of the questions I have favorited.
Cross referencing my inbox and favorites, I can confirm that there are no notifications for any activity from my favorites.
So, where are these notifications supposed to appear? Is this feature broken?