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
http://www.zoggles.co.uk/asp/tutorials.asp?show=index
http://www.rhysd.com/tutorial/
http://pixel.nascimpact.com/tutoriaux.php
Also, aside from the Eboy site, you can see good examples of iso stuff at
http://www.pixelfreak.com
http://www.armyoftrolls.co.uk (under published work)
http://www.kennethfejer.com/isocity/
http://www.supertotto.com/
.