I have been doing a lot of color work lately, and I have to say that it's helped me a lot with learning new techniques in Adobe Illustrator. I figured here I'll explain how I go about doing my coloring in Illustrator and why I use it versus using Photoshop.
I use Illustrator because it is a vector program, which helps make the lines come out smooth and crisp. Not all jagged like a raster program would, ie. Photoshop.
STEP ONE: POST PROCESSING (if needed; using Photoshop)
Some images need some post processing before you put the image in Illustrator for re-working.
This is especially true for pencil drawings that haven't been scanned correctly. Where the lines aren't black but a gray shade. What I do is change the image mode to Grayscale, because I'm just setting it up so that when I place it in Illustrator the lines will be black. Then the next thing I do is add a levels adjustment layer, you can do this from the image menu at the top of Photoshop, but with an adjustment layer you have a little more control and can go back if you don't like something. The only thing I do is mess with the Gamma slider, which is the one in the middle. Then when I've darken the the lines up without blowing the image out; this is where you start to see specks in the image and the lines become really jagged. The next thing I'll do is add another adjustment layer for brightness and contrast. It depends on the image, if I need to make it more white then I'll add brightness, and if I need it darker then I turn down the brightness. Then if the image has some specks or problem areas then I'll create a new layer a top of the image and use the paint brush to paint out the specks or darken lines. Once I'm happy with the image, I'll save the image as a PSD.
STEP TWO: ILLUSTRATOR TIME!
Things you'll need to know how to use:
Live Trace and Live Paint
Pen Tool (If you're not very good at using it look up Pen Tool tutorials, if you're use to using it in PS it's the same basically)
Gradient Tool (and it helps to also know how to use the Gradient Mesh Tool, but you can still do a lot with work w/the gradient tool)
Alright first thing you do is start a new print document, I usually start with Letter size. Then what I do is go to File>Place and find the PSD if I did post processing before hand. Sometimes the image may be larger or smaller then your artboard. If the image is larger then you'll need to resize the artboard, there's an icon in the tool bar that looks like a square that you can click to resize the artboard. If the image is smaller then you can just resize the image to fit in the artboard.
The next thing you'll do is click the Live Trace button at the top. By default it will do a black and white with a threshold of 128, next to Tresholds is a rectangle icon, you'll need to click that. When the dialog box comes up find the check box for ignore white, and click okay. This will give you just the lines. If the lines aren't showing up, you can play with the settings, usually just the threshold until you get the lines how you want them. Once you're happy with what you have click the Live Paint Button.
Next thing you can do is use the Live Paint Bucket, which is the bucket icon in the tool bar. Sometimes this works great, and another times, especially when using gradients, it's not so great. The reason being is that you cannot reposition the angles of the gradients using the paint bucket tool, at least as far as I know. Also sometimes the lines aren't connected so it paints outside of the lines and in areas you don't want that color going.
I usually paint in the areas that look good once I've painted it, if you paint and don't like how it is and you don't want to undo back, you can use transparent fill and go back over the areas you want to take out. Once I've finished painting in the areas, I'll lock the layer and add a new one. I drag the new layer below the layer with the lines on it. Then I get in the areas with the pen tool in the areas I didn't use the Live Paint Bucket tool. Remember you want to start from the bottom and work your way up. Every new shape that you make will be on a sublayer above the last. I typically use multiple layers so that making the shapes is easier to do. (hope that makes sense.)
That's pretty much it! If you have any questions feel free to comment below, hopefully I can be of some help.