You can use the fabric crayons or regular crayons. The fabric ones are actually colored on paper and iron-transferred to the fabric. The Crayola crayons, you actually color on the fabric. For both, you iron off the excess into paper towels.
There are also fabric markers that have a brush-like end and a felt-tip side. I bought some from Clotilde's (spelling?).
My preference is to use the Pigma-pens as outline markers and fill in the colors with any of the above mentioned.
No matter what, you have to heat set. ...and I read on my Sharpie Set "not for use on fabric" so if you use Sharpies, be aware, they may not last.