For the sky, grab a normal brush and beginning at the top, add a light blue increasing
the darkness as you make your way to the bottom of the screen.

Colors I used:

Now smudge the colors together. I used a strength of 30%.

For clouds, take a normal brush and make cloud like shapes with pure white.
Use the same layer as the sky.

Smudge the clouds in with 30% strength. Decrease the brush size to add smaller details to the clouds.
Just try to make some creative shapes using this tool.

I added some more trees, pixilated the sky, and some mountains.
The mountains are just the same as rocks, except more lighter colors are moved around.

Many cups of coffee later we have this lovely scene.
I added more rocks, bushes, and trees, and made sure everything was pixilated.
What a fun way to spend a rainy Sunday afternoon! I hope you found this tutorial helpful.

Some helpful links:

Drawing Sierra-Like Town Scenes
Heroine's Quest - My Game in Development
Awesome Cloud Tutorial
Great Forest Tutorial
More on Trees and Such