I stand behind all of the marking tools pictured above and I try to keep them all on hand so that I'm always prepared for any sewing situation. They are (from bottom to top): the Hera Marker, Clover White Tailor's Chalk, Yellow Tailor's Chalk, Blue Tailor's Chalk, Air Erasable Marker, Water Erasable Marker, Blue Transfer Pencil, and Red Transfer Pencil. The purpose of each type of marker is explained below.
(By the way, the whimsical background fabric is Rakugaki in Yellow by one of my favorite Japanese Illustrators, Megumi Sakakibara.)
Enjoy! -- Molly
Tailor's Chalk is the most elemental marking tool and the one most people are familiar with. We carry it in 3 distinct colors, white, blue, and yellow. Which color you use depends on the color of your fabric. The darker the fabric, the lighter the chalk should be or if your fabric is light, use the darkest chalk. If your fabric falls in the middle between dark and light, use the color that is the most opposite to the main color of your fabric (for instance, on a yellow-orange fabric use the blue chalk, on a blue-violet fabric use the yellow chalk). Chalk makes a clear non permanent line that comes out by shaking it off and patting the fabric. If that doesn't get rid of the mark completely a trip through the wash will. Since chalk comes off so easily it's not appropriate for projects that will encounter a lot of handling or for those that need to keep their marks over a long period of time. Chalk doesn't make a very precise line so if you need to mark something highly detailed chalk is not a great choice. What it is ideal for is marking hems and alterations on garments, marking folds (as in this bag pattern) and marking positions for buttons and bag handles.
Water Soluble Pen
The Clover Chaco Water Soluble Pen makes a thin, precise blue line. The marks it makes come out very quickly and easily by either spraying the fabric with water or for more specific erasing, by using the erasable tip at the opposite end of the pen (the blue side of the pen draws and the white side erases).
You can draw very intricate things with it and since I do a lot of embroidery this is the marking tool I use the most (check out my emboidered button project to see how much I rely on it!). This tool is best used over small distances. If you need to make a long line down your entire quilt this is not for you, but it is absolutely perfect for intricate drawing.
Air Erasable Pen
The Clover Air Erasable Choco Pen makes a bright pink line which disappears over time or by using the pen's eraser tip. It has all the virtues of it's water soluble cousin but is different in that you can get rid of your lines without washing (or wetting) the fabric. This is an advantage if you're working on something that can't get wet, but a disadvantage if, like so many of us, you need to get rid of your marking lines in a hurry (for instance, if you're embroidering a tie and it's your dad's birthday tonight!).
The Hera Marker seems too simple to work as well as it does. It's a simple piece of plastic, shaped sort of like a butter knife but when you press the edge along your fabric it creates an easy to see temporary crease. The crease will stay visible until you wash or press the item. The Hera Marker is ideal for marking straight lines with the help of a straight edged ruler as pictured above. I use a Hera Marker for marking my quilting lines (when I'm quilting in a straight line) and sometimes during piecing as in this Sawtooth Star block. Its unique shape and easy to clean plastic material also lends it to uses it wasn't designed for... like spreading glue inside a coin purse handle!
Clover Iron On Transfer Pencils are really cool. You can use them to trace or draw any design you like onto a piece of paper...
Place your drawing marked side down and iron it onto any fabric. You can use the same piece of paper for 2 or 3 transfers.
This is definitly an embroidery friendly tool. You can work on your design without drawing on the actual fabric and only transfer it onto your piece once it's perfect This is helpful because for all their previously mentioned virtues, erasable pens can make the fabric look worn out if you've erased and redrawn in the same place multiple times. Transfer Pencils also come in handy if you want to trace something exactly (If you are tracing something be sure to keep in mind that whatever you iron on to the fabric will be a mirror image of the original so if you're doing something directional such as text make sure trace it backwards.) The thing to be careful about when it comes to these pencils is that they do not erase, once you've marked your fabric it is there to stay and get embroidered over!