I've been meaning to post some of this stuff for ages now, finally sat down and got around to it. Here's some of the stuff that I've been working on for the past 2 years at Zynga on FarmVille 2. The game has a very illustrative style about it; everything we create is to look painterly and friendly, as if someone built everything with their bare hands. It's been an interesting challenge balancing the worn-down look; too little of it and the assets start to look really low poly (and they are, after all; buildings on average are around 1500 triangles, and decorations are around 150-300), but if there's too much wear-and-tear everything begins to look trashy and unappealing, so it keeps us on our toes.
Tool-wise I hop around Blender, Max, and Photoshop. After I have a block-out matching the concept art, I usually do an auto-unwrap followed with a simple flat colour bake from basic materials, and an ambient occlusion bake that's overlayed in Photoshop using a 'Soft Light' blend mode (using a 'Levels' Adjustment Layer on the AO to balance the lights and darks). I use Soft Light for my AO instead of Multiply since then the shadows don't default to black, instead they still retain the colour information of whatever surface they're shading. If I need things to get any darker I'll just duplicate both the AO and Levels and put them at the top of the Layer stack.
Anyways, I'm going to try and post some more stuff soon, I've literally worked on hundreds of assets over the past 2 years so it takes a lot of time to wrangle everything up, but at least now I have the Photoshop template built so it should be quicker (and I'll update the balloon one too, I made that one ages ago, haha). Enjoy!