This piece began as one of my Daily Doodles, where I experimented with a very loose and very sketchy line (no initial sketch/shapes) in Photoshop CS5:
I initially envisioned the little girl and her monster to be on a rooftop, but decided to put her on a hillside looking up at clouds in the sky instead:
I added some subtle shading in the bottom part of the hill to add a feeling of depth. I also used more than one pale grey for the clouds...again to add some texture and depth.
Next, I colored in the girl and the monster. Then, to make the hill look more like a natural part of the illustration, I added grass and flowers:
I drew in the stalks of grass by hand (digitally, that is) but did some cheating -- I only did a few sections, then copied and pasted those sections around the hill, altering the rotation a bit so it wouldn't look so obvious I was cutting and pasting. Then I added in some extra blades of grass here and there by hand.
Here's a screenshot of my layers, for those curious: