I asked people on the Sweatdrop forums and on Deviant Art to come up with keywords or catch-phrases of what I should draw and later set up a poll for the final decision. The winning concept was "Waking moment".
I started out with doing a few rough thumbnails to explore the composition. After that I did a rough pencil in light blue over which a tighter pencil drawing was done as the final line art. The blue lines were easily removed in Photoshop, as described here.
The digital painting was done in Photoshop. Here's a small GIF animation showing different steps in the painting process.
Secret Colours can be ordered directly from Karen Lusted at firstname.lastname@example.org. There's some more information about the book, including preview photos in her DeviantArt journal.