Get your art supplies out: acrylic paint, brushes, a plate to mix colors, a cup with water, a rag to dry the brushes, a pencil, an eraser and of course the wooden pegs. Yeah, I know you already knew all of that, but I wanted to say it anyways.
Here is what I do, the little peg on the left has the sketch of Thor and the one on the right is a finished one I made for my son. On the background is the picture I found on the internet to use as inspiration.
These are the pegs in progress. Since they need a couple coats of paint, I apply one coat, start another peg and by the time I am done with the second one, I can go back to the first and apply more paint.
After I'm happy with the painting part, I wait for them to be completely dry then I go outside and apply a couple of coats of clear UV-resistant spray so the paint will stay and they look nice and shiny. Some characters have capes, I make them out of a piece of felt and hot glue them.