You can use any paint program to create pixel art, from Paint right on up to Photoshop. Pixel art is typically created literally one pixel at a time, using the pencil tool set to 1 pixel with the anti-aliasing turned off. There are some shortcuts that you can use, for example you can create brushes to quickly draw isometric lines (2 over, 1 up is the rule of thumb). If you check out Eboy's site at http://hello.eboy.com/eboy/category/obj ... ags/ecity/
, you can see that they build their larger images from a collection of smaller images, cutting and pasting them together into their huge, eCity scenes.
There are a decent number of isometric pixeling tutorials online. Some of the better ones, in my opinion, are
Also, aside from the Eboy site, you can see good examples of iso stuff at
(under published work)