I think the the best way , and that gives most control is Dodge and Burn type of retouching. Having a blank layer set to Overlay and paint with white or black to increase or decrease contrast, and general contouring. You can also use a couple of Curves adjustment layers ( for highlights and darks ) and paint in their layer masks.
It is very time consuming to do this on a pixel level basis so its more for really special projects, not for the family album =)
Here are some links to images of before and after and the layer mask for a skin retouch i did on another forum.
// result and layer mask
http://picasaweb.google.com/lh/phot...?authkey=Gv1sRgCJfT9Iam2r_AWA&feat=directlink
// before and after
http://picasaweb.google.com/lh/phot...?authkey=Gv1sRgCJfT9Iam2r_AWA&feat=directlink
// Closeup for the eye ( mask )
http://picasaweb.google.com/lh/phot...?authkey=Gv1sRgCJfT9Iam2r_AWA&feat=directlink
But for general images you probably need a faster workflow, and there are a number of ways to do it. Heres a link to a collection of 70 beauty retouching tutorials in different categories ( it has probably been posted before but never hurts to post again ).
http://www.smashingmagazine.com/2008/07/15/70-beauty-retouching-photoshop-tutorials/