From BlenderWiki
Grease pencil
The grease pencil is a Blender tool used to draw sketches directly over the 3D View or the UV/Image editor. It can be seen as a series of transparent sheets of onion paper laid on top of those editors.
In the 3D View, the sketches are linked to the active object, so a different set of sketches can be drawn for different objects. If there is no active object, sketches will be linked to the active scene. In that case, objects with no associated set of sketches will show those of the active scene (if there is one). To unlink or manipulate a set of sketches from the active scene, there must be no active object.
In the UV/Image editor, the set of sketches are linked to the editor itself, across all scenes of the file.
To start sketching, press D, and without releasing, draw on the desired editor with LMB 
. If instead you use RMB 
, the sketch will be erased. Using CtrlD with LMB a straight line is drawn. With CtrlD and RMB , you can draw polygons (finish the operation with Esc, Space or ↵ Enter). You can also invoke these operations from the Tool Shelf sidebar of the 3D View in some working modes.
When the sketch is done, you can tweak the operation from the Grease Pencil Draw, which will let you choose between any of the drawing modes (freehand, straight lines, poly lines and eraser). The Stroke field will inform us about how many segments (items) our strokes are translated into.
Each sketch in a sketch layer is stored in an "onion paper". This sketch spans in the timeline from the animation keyframe in which it was first drawn to the frame immediately before the next sketch. If you want to modify one of the sketches, you must set the current frame to the one on which the sketch was drawn; otherwise you will be inserting a new sketch (a new "onion paper") in the active sketch layer, starting at the current frame. If there is no active layer, a new one will be created.
The first sketch ("onion paper") spans from the beginning of the timeline to the frame before the second sketch. The last one spans from the frame in which it was defined to the end of the timeline.
Every sketch layer has got its own sequence of sketches distributed along the animation timeline.
The Grease Pencil panel in the Properties sidebar of the 3D View or the UV/Image Editor is useful to manage the sketches and layers.
You can work on the "onion papers" in the DopeSheet, using the Grease Pencil context, so that you can move them along the timeline.
In the Preferences editor there are some useful settings regarding how to generate the sketches from free drawing.
