If you are doing this for first time it is better to choose an image that has clear lines. Otherwise it will take longer time.
Open the B/W picture and change its Color Mode to CMYK. To do this – Image->Mode->CMYK. let the channels as it is, 8/16.
If your Image is an Old Image you may need to clean up Dust, scratches, and uneven tones before you start working on it. To do that Image->Image->Adjustments->Levels and move the little arrows to edit.
Pick the Polygonal Lasso Tool and make a rough selection of the face and all skin. After that go into Quick Mask Mode by pressing “Q” key on your key board.
The elements you didn’t select is now “red”, and your brush palette has turned in to white and black.
Now you can edit it just like any regular mask, select White brush to reveal, and black to cover. Use Gaussian blur where the skin mixes with another element such as hair. to give it more of a fade instead of a harsh line. The only thing that should not be red is the skin.
Press the “Q” key in your key board again to go back to normal mood. And this will select the blank area(that was not red).
Now it’s time to Color the Image. While your Skin Selection is up, add an adjustment layer. Layer->New Adjustment Layer->Curves. Now you are ready to edit the colors. Select from the drop box(or press “Ctrl+1/2/3/4″) to choose the color you want to edit. After that your Image will look something like this.
You may also add “Color Balance” mask.(try them)
Now it’s time for the hair. Right click on the newly created adjustment layer and Add Layer Mask To Selection
The skin is now selected. Press Ctrl+Shift+I to inverse the selection, the rest of the image is now selected. Press “Q” on your keyboard to enter in to Quick Mask Mode again. Repeat as you did to the face/skin, cover/reveal the hair with Brush tool. When you are done press the “Q” button again to select the hair.
Repeat the Step no 6.
See how it looks like After the hair color
Step 8. Do the same with the back ground and the rest of the Image.
Background color balance
Dress selection. You can simply use the Polygonal Lasso tool for the dress.
After all this I added simple Photoshop layer Effects(Gradient and Pattern) to the Background.
Here is the Final Image: