As Jon says you need a high res picture that can be viewed at a decent magnification. You then need to set the hardness on the eraser to match the outline of the object you are putting colour back into (not too sharp, not to fuzzy) so that the effect looks clean.
Same effect can be reached using the history brush, again using a suitable brush hardness. Advantage of the history brush is that if your hand slips you can easliy undo it without deleting the whole layer and all the work you've done.
1) Make a duplicate layer and desaturate it as per Jon's post above (call it Desaturated for simplicity). Shortcut to desaturate in photoshop is ctrl+shift+U
2) Enlarge the image to a size where you think you can work with it (200-300%)
3) Select the history brush from the tools pallet. (In photoshop it's right click on the brush with curly arrow icon in the tools pallet, the drop down menu will give you history and art history brush)
4) Select your brush size dependant on your image.
5) Select your brush hardness. (Try a few blobs in the centre of the obkect to be coloured until you find one that looks similar to the edge of the object to be coloured)
6) Paint away. **Ensuring that the "Desaturated" layer is selected.
NB You can move the image around the screen by holding the space bar down and dragging the image around with the mouse.
To correct mistakes:
7) Open the history tab if you haven't got it up already. (It's under the window drop down menu)
8) Select a history itemfrom before the mistake was made by clicking the cursor in the little grey square next to it.
9) Now paint over the error you made, it should return to back and white.
10) Once you've finished correcting you can reselect the original image in the history tab, (in colour at the top of the tab), and carry on painting colour back in.
11) When effect is complete flatten the image and save.
Hope that was simple enough. Sorry if not. Can't put screen pics up because my "Print Screen" isn't working.