I think it goes without saying that crayons have had their day. Everyone has picked up a crayon at some point in their life and most of us remember the smell with fondness. Today I usually chose something other than crayons, but I'm not saying I don't ever use them (ok, I honestly can't tell you the last time I've picked up a crayon). Since the sharpened tip gets worn down so fast on crayons, they are really only good for coloring right out of the brand new box (unless you get one of those huge delux boxes that has the little sharpener on the back), or coloring large things - like the sky, the background, etc. Crayons are also wax-base, so there's no mixing them with other materials. The wax resists ANYTHING water based (markers, pens, etc.).
Speaking of water based markers and pens, that brings me to one of the coloring implements I can't do without - Crayola Supertips. You can buy a set of 50 of these at Back-To-School time for about $3, or you can click on this link to order them on Amazon. I love these because they're cheap, they come in TONS of colors, they don't bleed through (most) paper, and they have this neat thick/thin tip so you can practice calligraphy (crayligraphy) with them.
Another ink-based product that I REALLY like is a nice set of fine tip pens. My FAVORITE set is the Staedtler Triplus Fineliners (link here), but the more inexpensive Paper Mate Flair Pens (link here) work well too. They both come in oooooodles of great colors and are PERFECT for writing or coloring in those tiny hard-to-reach spaces. You can find these at Target or WalMart (as well as Amazon) and the prices are going to be comparable.
But I would be remiss without mentioning (in depth) my favorite thing to color with - Prismacolor colored pencils. I bought my first set in 1997 when they were on my supplies list in college (fine arts classes) and I've never looked back. I have since bought several sets over the years to supplement my old ones (as I wear them out), but some of the originals are still around. Prismacolors are the best because they're professional grade and the lead (it's not actually "lead", but that's what I'm going to call i) has more pigment and less filler, so the color is richer and brighter. They can be layered, mixed, smudged, and you can draw over them with your fine tip pens (or markers) since they're not totally waxy (think: crayons). Now, you can use Crayola brand colored pencils if that's what you have - there's no requirement for buying the super fancy colored pencils. What I AM telling you though, is that once you use the good ones, you can totally tell the difference in the quality and the way they feel. My kids are completely spoiled and have to have to use my pencils when they have school projects... In their eyes - all others are inferior!
One drawback is that these pencils are quite a bit more expensive than the generic or Crayola version. A tin of 72 Prismacolor colored pencils will set you back around $80 if you buy them in a Michael's or Hobby Lobby, but you can get the EXACT same thing on Amazon (this link) for under $25!