yCal can distinguish between normal events and birthdays and will show birthdays as little candles in year view and in week view (note: you can switch on/off showing birthdays in the year view's context menu).
yCal distinguishes normal events from birthdays by calendar source. To this end, you may want to specify a dedicated calendar for this purpose. The configuration assistant (automatically firing up upon your very first use of yCal, and later on being available in the menu) helps you define a birthday calendar.
You can configure an appropriate calendar manually as well. Select a calendar from the left pane, Alt-double-click it (or right-click and select from the context menu), and set "Interpret entries in this calendar as:" to . Note that a candle icon will show up right to the calendar name on the left pane.
Please note, however, that other events you may have had in this calendar will not show up anymore (don't worry — they won't be deleted). It is thus a wise decision to have one calendar specifically configured for birthday storage only. You can add local calendars (stored on your local machine) from within yCal (e.g., by clicking from the menu), however, to add a calendar hosted on a remote server, please use Apple's iCal or Calendar app instead (read here on why you can't do this from within yCal).
Mac OS X automatically creates a (by default hidden) calendar for birthdays. This calendar is used by Apple applications such as Contacts, iCal, or Calendar. You can activate this calendar (meaning: make it visible for calendar apps) from the preferences menu in Apple's iCal or Calendar app.
If you have activated the OS X birthday calendar, it will automatically show up in yCal (under the group "Subscriptions") as well, and entries in this calendar will automatically be interpreted as birthdays.
Note that Apple has made this built-in birthday calendar a read-only subscription only — entries cannot be added, edited, or removed from any program other than Apple's Contacts app.
Birthdays are managed (i.e., added, edited, and removed) via a dedicated configuration panel. This panel is opened by double-clicking on a birthday calendar (or right-clicking and choosing from the context menu). Note that this panel (and the respective entry in the context menu) is only available on calendars that have been configured to serve as birthday storage.
Use the button to add a birthday entry. Enter date and title and hit the Enter key. To edit an entry, simply double-click on it. To remove an entry, select the entry and press the button.