I wrote this last year. It popped up on my timeline again so I thought I'd share it again because it is super helpful:
Given the marketing spins companies put on their products I think there is a lot of confusion for what colored pencils are and aren't especially for the folks just beginning their journey with colored pencils. Hopefully this helps clear up some of the confusion.
The dictionary definition: "Unlike graphite and charcoal pencils, colored pencils' cores are wax or oil-based and contain varying proportions of pigments, additives, and binding agents." Although they can be manipulated with heat, thinners like Gamesol and depending on the binder, dissolved with water or alcohol, colored pencils are not a mixed media. They are colored pencils that can be applied in a variety of ways.
The following should help understand colored pencils.
According to the Cornell Center for Material Research (CCMR) inks are colored liquids that have been in use since the inception of writing and drawing and are used to write or print on surfaces. The most important part of the ink-making process is the dye or pigment that gives ink its color.
Colored pencils like the brand Inktense have a high proportion of pigment to binder so when dissolved with water they resemble the color intensity of ink but they are still in fact colored pencil. In spite of its water soluble property, Inktense is not a watercolor nor is it an ink. It is a water soluble colored pencil.
A painting method in which the paints are made of pigments suspended in a water-based solution.
There are "watercolor" pencils. Because the binder used with the pigments is water soluble, they can give an appearance of being watercolor but they are still colored pencil.
Water soluble colored pencils use a binder that when wetted and then dries, the pigment is then permanent. Once set with water, the pigment is washable. For this reason water soluble colored pencils (and sticks) are often used on fabrics for wearable art and quilts, etc. The word permanent doesn't make water soluble colored pencil archival quality. The word permanent means if you put it somewhere you might want to remove it later, it's not going to wash off after it has been set. Archival quality is an entirely different conversation.
Still not convinced?
Watercolor is truly water soluble. Even after it dries it can be wetted and then altered. Depending on the staining factor of a particular pigment it can even be lifted from the paper it was previously applied to.
If you just want the simple answer to what these are and aren't:
The Watercolor Society of America will not accept pieces created with watercolor pencils because they aren't watercolor. Recently they have added to their entry criteria by making the distinction the media must be water soluble and reworkable. Watercolor pencils don't meet this criteria.
The Colored Pencil Society of America will accept pieces created with watercolor pencils - they are colored pencils with water soluble pigment.