Well, first off, I do all of my pixel art in Corel Paintshop Pro X4 (14th version, lolz)

So I took this picture and resized it to about the size I wanted for the item, then I outlined it. The wrapper I only outlined the top, and then did the rest myself, and the same with the candle flame. After that, I just shaded everything.

Random Fact: Sometimes when pixel artists say a piece is "inspired" by a picture, it's either outlined, or just used as a reference for the design/shape/shading.