Earlier quoted context omitted.
I'm glad you asked! :) I created it in Adobe Illustrator using a gradient mesh: http://i.imgur.com/kuuFVO2.png Illustrator's gradient mesh tool lets you create a grid of points where you can choose a colour for each point. I overlayed the grid onto the sprite and estimated the distance at each point.
You mean each point ?That's really tough work.
He didn't have to color in every single pixel. The gradient mesh lets you create a loose grid of Bezier curves, with a color set at each intersection; Illustrator will interpolate between them.