What they do is this:
They take an image. This is usually:
A hard to find image, so that the fact that they "made it from nothing, without reference" can be supported.
Or, an image that is usually drawn, like the Mona Lisa.
They then bring it into a digital image editing program, and use a feature called "Colour Palette Reduction".
This asks for a number of colours to reduce the image to, makes an average of the picture's colours to determine which colours to use, then, for each pixel, calculates the closest colour to use.
This makes the image look like a picture from the SNES, which had a 256ish colour palette.
The most plagued place with this is Deviantart.
You can easily identify an MSPAINT whore, as they usually repeatedly say that they did indeed do this in mspaint. Also, they usually say it took them a short amount of time (relative to how long it would take a human to produce art of that caliber from MSPAINT).
Also, for the rare few that own PSP or Photoshop, you can actually bring it into that program, and use the feature called "Count Unique Image Colours". A real MSPAINT drawing will have 1200 or less. A fake one will have some ridiculous number, like 60000.
The time required to make a picture with 60000 unique colours would take years... if not decades.
lol i did this in mspaint!!! im so good