I've gone on and on in the past about my love of Sharpie Markers. Now I am also running a parallel love with Prismacolor Premium Colored Pencils (accept no substitutes).
They are pricey...dozens of dollars for a nice tin of choices, but you can also buy them individually in some art/craft stores and online. Spend an extra $25 for an electric pencil sharpener from an office supply store, it will save you aggravation.
I've actually blended the two mediums. I get the basic colors, shapes, and values down with the Sharpie (or now Prismacolor, since I've supplemented my color selection with Prismacolors); then I fill in with Prismacolor colored pencils. I actually prefer them to the effects I got with markers because they produce a softer, richer look.
Smudgey sometimes, too, but depending on the end result wanted that may or may not be a problem and can be overcome with better care on the artist's part.
Prismacolor is running a competition. See here. Deadline is May 31, 2009.
I've got four colored pencil pieces in a show at the Worthington (OH) High Road Gallery. Here they are.