Yes, I know ‘watercolour pencils’ seems impossible, but so did ‘drawing with an eraser‘ and it worked!
If you use watercolour, you’ll know that when it comes from a tube it will harden to a solid state but still be reusable when made wet. Watercolour pencils work in the same way, instead of using graphite, they use a solid core of watercolour which can be used, in this case, like you would with a normal coloured pencil. The main difference here is that when you wet the pencil drawing, the ‘graphite’ will dissolve leaving you with watercolour.
Here’s a quick example I sketched this up just last night using my Aquatone pencils (click here for a quick report on them and the Derwent Inktense pencils), it’s part landscape, part abstract (hence the odd colours):



