Adobe Illustrator is a graphics program that works with vector graphics. One of the benefits of working with vector graphics is they keep their resolution when they are enlarged. When working with pixel graphics like JPG or Photoshop pictures the quality of the graphic deteriorates when it is enlarged. Vectorized graphics also allows the graphics to be segmented and colored much like a coloring book.

Below is a link to a video tutorial on how to take a scanned sketch and use the live trace feature of Illustrator to vectorize the graphic and color the graphic.

http://www.adobe.com/designcenter/video_workshop/?id=vid0043

Windows Media Player Version of Tutorial