I started by typing the letting in a font (called Tolkien), and then tracing over it using my Wacom tablet in photoshop. Once I was familiar with the font, I did most of the text free-hand.
The whole thing was made electronically, by 'brute force' (i.e. drawing lines by-hand with my tablet) mostly, but some creative copying and pasting, with the trees, for example. The roads and the river have a Stroke layer style (to make the black outlines).