I go about it in three steps, which can look pretty convincing. Obviously if you want very very realistic pieces you can keep highlighting till the cows come home.
What I do:
#1: Basecoat the whole area with a darkish colour, say Scorched Brown/Rhinox Hide. For additional shading, you could then wash it with Badab black/Nuln Oil.
#2: Next, you want to choose a lighter tone of the base colour. Depending on what you're painting you might go towards a more orangey-light brown (like Bestial Brown) or maybe a paler brown like Graveyard Earth/Steel Legion Drab. Or, you could just add a bit of Bleached Bone to your base colour. Once you have the colour you like, mix it to the base colour and paint this mixture on the more elevated parts of the area (high folds, parts closer to the light source, etc.)
#3: this is the proper highlight stage. You can either use your highlighting colour straight from the pot (which is what I used to do), but for a much more 'professional' look, it really helps if you water the colour down (three drops of water usually suffices) till it is quite runny. Now, using a fine detail brush, pick up some paint on the brush and slowly drag it across the highest parts of the area (the tip of high folds, edges, etc). This leaves a faint trace of the paint and because it's so diluted it seems to 'flow' into the lower layers, giving it a more subtle highlight. Don't despair if your brush deposits too much paint; quickly brush your paintbrush off on a piece of kitchen roll and use the brush to 'suck' up the stray diluted paint droplet. Also, you may find that you'll need a few goes till you can really see the highlight, this is fine!
All I can really say is experiment! If you have a good picture in your mind of what you want, just go about it logically and don't be afraid of mixing paints! It took me a while before I did but now I never look back
Example: step one - Scorched Brown/Rhinox Hide, step two - Scorched B/Rhinox H, Bestial Brown 50:50, step three: watered down Bestial Brown highlights
Hope this helped! If you have trouble understanding what I mean I could probably make a picture guide tonight or tomorrow?
