Well, let's see... Ahem...
Back when I didn't have a tablet, I drew a picture in pencil... then inked it and erased the lines. I just inked with a ball-point pen. Then I scanned in the image, opened it up in Photoshop erased any extra gunk on the picture and fixed up some of the lines. Then I fiddled around with Brightness/Contrast to get the lines black and (fairly) smooth.
For colouring, I just added a new Multiply layer and just coloured everything in like that with the mouse.
Example:
http://img.photobucket.com/albums/v228/Tawneh/elf_final_signed1.jpgYou can see the lines aren't as smooth as they could be.
But now that I have a tablet I do all the drawing on the computer. I usually use openCanvas, and I start off doing a rough sketch in a light colour. Then I create a Multiply layer over that, and put in all the linework. Then I get rid of the sketch layer, and create ANOTHER multiply layer for colouring. Then of course, colour. And the lines turn out a loooot smoother.
Example:
http://img.photobucket.com/albums/v228/Tawneh/TELEKITTY.jpg