As part of a level 3 Multimedia course, I've been teaching the students how to use the paths feature in Photoshop to produce clean artwork. It's slightly clunky compared to using Illustrator, but we are using PS for the unit. After scanning in the sketch, adjusting it and tracing over to produce the line art, we then used Multiply, Overlay and Adjustment layers to add the shading.
The demo character below is a futuristic version of the Wolf from Red Riding Hood, this time as a robot. He is designed to walk on two legs or four, depending on the situation. The large head on his chest can open up to swallow you whole! Click to enlarge.