The process is simple: First, you begin with a photograph you’ve taken [or gotten from somewhere else], and print it on high quality photo paper. Then, you color in the design with various sharpies. After this, you use an X-Acto knife to carve the design and negative space into the design. After this, you can blend with any color sharpie you want into the paper you’ve freshly scratched into the design.
I’ve duplicated this image in photoshop and tweaked it a bit.
original image 4″×6″