1. Open the original photo.

2. Adjust the brightness and the contrast to achieve a well-contrasted image.

You can also use the Hue/saturation control to obtain vivid colors.

3. If the original resolution is not large enough, resize the image to the desired dimension. For example, use a width of about 1000-1200 pixels.

5. To define the edges of the drawing, make a copy of the layer, rename it 'Pen Edges' and apply the Smart Blur filter (Filter > Blur > Smart Blur) with the following settings:

- Radius: 35
- Threshold: 80
- Quality: High
- Mode: Edge Only

Change the radius and Threshold parameter depending on your picture.

6. Invert this layer (Ctrl + 'I') and apply a Gaussian Blur filter (Radius = 1.1 pixel) to smooth the black edges. Change the layer blending mode to 'Multiply' and set it to invisible.

6. Duplicate this layer ('Pen Edges'), rename this copy 'Pencil Edges', go to Filter Gallery and apply these filters in sequence (from the below to the above):

Smudge Stick (Filter > Artistic > Smudge Stick)
- Stroke Lenght: 0
- Highlight Area: 0
- Intensity: 0

Film Grain (Filter > Artistic > Film Grain)
- Grain: 2
- Highlight Area: 0
- Intensity: 0

Use the Auto Levels tool (Ctrl + Shift + 'L') and set the layer blending mode to multiply.
Now set it to invisible.

7. Now we need to crfeate the colored base layer: go back to the original layer, duplicate it, make sure it is below the other two layers and apply the following filters:

Paint Daubs (Filter > Artistic > Paint Daubs)
- Size: 10
- Sharpness: 0
- Brush Type: Wide Blurry

Film Grain (Filter > Artistic > Film Grain)
- Grain: 9
- Highlight Area: 3
- Intensity: 1

Smudge Stick (Filter > Artistic > Smudge Stick)
- Stroke Lenght: 8
- Highlight Area: 0
- Intensity: 0

Film Grain (Filter > Artistic > Film Grain)
- Grain: 2
- Highlight Area: 0
- Intensity: 0

You should obtain something like the picture on the right.

8. Now use the Hue/Saturation and Brightness/Contrast tools to change the general color range (see example on the right).

9. Set the other two layers to visible make sure they're above the colored layer and you should obtain something like the final picture on the right.

Click here to see the high-res final image.

Here are some sample results of the "Clip Art Maker" action.