The Pencil tool is your basic drawing tool. You can draw in different colors, but other than that there are no other options. The pencilís stroke is a single pixel wide, which makes it useful for working with fine details, but a poor choice for filling in large areas of the image with color.
You can do simple line drawings with the pencil if you have the coordination to guide the mouse with great care.
Tip: To draw straight lines, hold down the Shift key as you draw with the pencil. Your pencil line will be limited to horizontal, vertical, or a 45-degree diagonal.