I thought they used a sketchpad with stylus that could register "pen pressure" and Paint.NET, Gimp et. al. were able to make it look like hand drawn. Mice suck for drawing.

The artists where I work use Photoshop with a Wacom tablet.

I should also add, that it's not just the software you use, but how you use it. I was talking to one of the artists about how he worked once, and he said that he rarely used any of the features that are exclusive to Photoshop. It's mostly a matter of knowing how and when to apply the basic tools.

Watching them work is simply quite amazing. When we were working on storylines for one of the games, I described a scenario to one of the artists, and he promptly started drawing. Less than an hour later, he had a full-colour "watercolour" image that up until that point I'd have thought would have taken days to draw.

Yeah, I drew my avatar in 30 s after someone on a.cc said he needed a squirrel character for his game.

Ah yes, I can recommend ArtRage. It's easy and fun to use, all the tools try to emulate real life drawing/painting tools and it has funky features like hardware accelerated canvas rotation and zooming, so it's really like a virtual sheet of canvas/paper.

I have been using it myself for half a year now and I find it much more attractive for sketching and concept stuff than using some other bloated image manipulation packages like GIMP or PaintShopPro, which all have cluttered interfaces which I find only get in the way while I'm in a creative flow.

Also, as others have mentioned, use a tablet, mice are only good for low level pixel pushing.

P.S.: Still nothing really beats the intuitive use of just a regular pencil and a real life sheet of paper for drawing practice (also works without electricity).