The pen tool is a marvelous contraption that I use for almost all of my vexel work. Of course I also use the marquee and elliptical marquee tool as well. The key to mastering the pen tool, as well as the rest of Photoshop is understanding the shortcut keys on your keyboard.
While you may use the convert point tool, it is much easier to use the alt and ctrl keys. Once you create your path, you can edit it using these keys simply.
The path was started at the leftmost anchor point. On the second anchor poin, the ctrl key was used to create the curve. On the third anchor point, the alt key was used. The difference in the two is that while the ctrl key alters both anchor arms while the alt key allows you to move whichever you choose. To close the path, simply click on the original anchor point.
Once this is done, right-click and several options come up. Click fill path. Notice the jagged edge. This image is made of pixels. In a true vector, you would not see this. Once you have filled the path, it’s time to make an outline. For a cartoony look, I use a black outline. This is accomplished by using the magic wand tool (making sure anti alias is checked) and selecting outside of your object. Then, go to Select>Modify>Contract. Here, I contracted the selection 1 pixel. Still under the Select menu, click Select Inverse. Create a new layer under your object and fill the selection. Voila! You now have your outline. If you had simply filled it on your object’s layer, it would have been jagged looking.