Some say that the word pencil has multiple origins. In Latin the word was "pencillus" and meant "little tail", and some experts belive this to be the true only origin. Some have also claimed that the word pencil originates from the French word "pincel", and means "little paint brush" originally.
Actually pencils are made up of graphite, and thats a fancy word for carbon. Some pencils have synthetic carbon inside of them due to the rise in graphite demand in the tech. industry. The rumor that pencils can give you lead poisioning comes from a misunderstanding. Pencils in Roman times had been made of lead commonly referred to as a "stylus", and make very similar metallic marks as graphite.
Well most pencils you will find are labeled "2B". This is an indicator of the hardness of the graphite stick inside the wood shell. Pencil hardness can vary from "12H" at the hardest, and "9B" at the softest. The softer pencils are used in art to make darker marks, and the harder pencils are used for lighter marks. To make the different levels within a pencil, manufacturers have been mixing specific amounts of clay with their graphite/carbon to create the desired hardness. Some pencils can have graphite considered so pure that each pencil can cost $80.00 to $150.00
Pencils have been made with many types of wood over the years. Recently the Red Cedar, Incense Cedar, and California Cedar. These are softwoods that make it easy to work with in large batches. Many pencil brands will actually "scent" the wood artificially to give the user a classic "pencil smell" when sharpened. Most pencil paints are non-toxic, and companies are considerate on pencil chewing habits. Pencils are yellow because in the 1890's most pencils came from China, and the color yellow is considered respectful and a sign of royalty. At the time China was hoping to convey a sense of "regal" between the United States through their trading, and these ornate writing instruments surely caught on.