I used Paintshop Pro 7. I used normal brush tool for the shading and then I made a new layer (set it to multi) and colored on that one. This picture is not the best pic I have shaded though. Look trough my site (or more pics on Side7) and you'll see :).
::raises hand:: I do, I do! I want one! He's really adorable, even with that evil glare on his face. I love how the guy holding him is completely oblivious to the wrath of the cute little dragon.
I'm very impressed with your cel-style shading. It's very, very well done! What program were you using for it? And what tools, in that program? I think it's most impressive on the boots. They look amazing, with the details in the wrinkles.
And the text is just too hysterical.