This lesson involves the Brush tool in Photoshop, which includes both a soft round (brush that starts off with low opacity and builds as you paint on it) and a hard round (100% opacity immediatly). To color an old image (the cowboy), I created new layers (one of each different color/different section to color) and then painted over them with the color of choice. After, while selected on the layer, you turn the blending mode of Overlay, and lower the opacity, so that the color is more natural and not as saturated.
It works best with a clear image. I did have some trouble with the shoe since the left one seemed to be blended in with them image. You could try to use Levels adjustments to figure out where hidden shapes are, but it may or may not work with every photo (aka the feet of the cowboy).
Alexes's Blog 