Oil based clay is the best clay for animation. The best brand is called Van Aken. Van Aken clays come in many colors, is very inexpensive, is animation proven and non toxic. Making new colors out of existing colors from this brand is extremely simple to do. All you will need is a double boiler, a large piece of plastic wrap, and a spatula.
First, boil some water in the double boiler, and place the base color clay you want to change the color of, in the top pot. Once it is fully melted, place different colors of small pieces of clay into the pot to modify the base color. Keep mixing until the clay is completely fluid, and adjust the colors accordingly. Next, place a long piece of plastic wrap on a level table top.
When you have the color clay you want, pour the still melted clay on the plastic wrap slowly, until it is all out of the pot. Any clay left in the pot should be quickly rubbed out with a paper towel so the next time you mix clay in your pot, the new colors wont mix with the old colors. One word of advice when doing this, is to make sure you have plenty of fresh air in your house because the oil can evaporate into the air and make you sick. Also, melted clay can stick to you if it is spilled on your skin, and will burn. Trust me, I have done it a few times and it hurts quite nicely. So use common sense, or ask an adult for help.
UPDATE 2013: In the US, there is a new brand of clay that behaves similarly to Van Aken. It's called Craft Smart clay. It's manufactured in Thailand of all places, and has some properties that are better than Van Aken. From less cracking to less color transference from your fingers. In other words, the colors won't mix from one color to the next. You can get it in Michaels craft stores currently for a very affordable price. It also is more rubbery and great for fingers. However for faces we recommend using original Van Aken as the "rubberyness" won't flow out into parts of the face you don't want to move. For elbows and knees however it's great. Thank you Austin Williams and Tony Merrithew for this information!
(2018 Update!): Sad to say that over the past few years we've found out that Craft Smart clay slowly dries out and becomes rock hard. We no longer recommend this clay as promising as it once seemed. It took about seven months of keeping some beige clay in storage to find out. The clay became too hard to sculpt and even exhibited cracking when we tried to break pieces off.
Van Aken is still a good clay as of 2018 however the formula has been changed and some ingredients either added or removed. Many animators have complained within the last few years about it, however I personally still find it usable for animating. It really depends on the quality control of each batch and some batches don't make the cut. I still recommend it however as it is still one of the best you can find. You can buy Van Aken clay here.
We now recommend two types of clays that we've studied. Sargent Art clay and the more recently created Puppet Putty.
Sagent Art is similar to Van Aken and has great sculpting properties. It has just the right amount of wax and colorants to give vivid and aesthetically pleasing translucency and vibrance. It also animates well, you can melt it in a double boiler and is has not dried out on us. Even after sitting in a garage for many years. It works like brand new. You can find Sargent Art clay in our store here.
Puppet Putty is one of the only formulas made specifically for animators. It is created by Don Carlson by hand (currently) and has the most flexibility of any of the clays we recommend. Although it is technically not clay, many animators will mix in the translucent white Puppet Putty with Van Aken to create a hybrid of both flexibility and the matte sheen of the Van Aken. Puppet Putty tends to be a bit shiny from the high wax content. This is somewhat of a negative attribute but a matte version is being created. It is lighter than clay which means puppets do not easily fall over from gravity. So if you plan to make an all-clay puppet, it is the perfect solution. This particular formula does not exhibit the same color bleeding effects that other clays have. So if you make a puppet with both white and black Putty, you don't have to worry about the colors smearing on one another. Another great upgrade for the animators tool chest. We now sell Puppet Putty in our store here.
If you come across a clay you want us to review, please send us a message in the contact area.