Microsoft ZoomIt is an excellent Windows utility that lets you draw or write free-hand on the desktop screen in various colors. [see screenshot above]
But it's more than just another screen annotation tool - you can pan like an on-screen camera or magnify any area of the desktop using either the mouse wheel or the arrow keys.
It might take a minute to get used to the ZoomIt Options and hotkeys but once you master that, it's fun all the way. [related reading: Convert a Laptop into a Tablet PC]
Try this sequence - Ctrl+1 (to zoom the screen), Ctrl+2 (to change the mouse into a screen pen), "r" to change to red ink (b for blue, g for green, y for yellow) and finally move the mouse pointer across the screen and see the magic.
ZoomIt works on all versions of Windows. There's an option to change the nib size of the pen as well. Unfortunately, you cannot directly save your creative screen drawings but the Print Screen key can help. And there's no eraser.
Download ZoomIt | Homepage