EDIT: New updated version here - viewtopic.php?f=31&t=735651
There have been a few fur tutorials going around so I thought i'd make one too^^
Step one: color in what your shading(or in this case, make a blob)
Step 2: select the "Burn" tool and set the size to 1 and opacity between 60 and 70, so its noticeably darker when you make a mark, but not to dark where it stands out to much, and make a lot of straight lines going in the same direction
Step 3: select the dodge tool and do the same as above, except now you're making lighter color strokes, not darker
Step 4: select the smudge tool and set the size to 3 and the opacity between 60 and 80, smudge it making sure to follow the path of the fur strokes you just added and make sure its evenly smudged
Step 5: add details! I used the dodge tool to make a light spot, like on chibi hair, and then used a bit of the burn tool to make it look more like hair(it can go either way and be fur or hair depending on what details you add)