Start with a 16oz bag of mini marshmallows and a 2lb bag of powdered sugar.
Sift the powdered sugar into a large bowl (this will help prevent lumps in your fondant later on).
Put the mini marshmallows into a microwave safe bowl and add 2 tablespoons of water.
Place the bowl in the microwave and heat in 30-45 second increments until the marshmallows are melted and you have a smooth mixture.
Add this point you can add in any coloring or flavoring that you desire. Mix it in well. The color below looks a little off because of the flash on my camera - the final resulting color was the purple shown at the bottom.
Then add in the powdered sugar. I usually add in about half of it and mix and then add more and continue mixing until it all starts to come together in a large sticky ball.
I then coat my counter and my hands in Crisco and lift the ball of fondant out onto the counter. I then begin kneading the fondant to further combine the sugar with the marshmallow.
When you're done kneading you should end up with a ball of fondant that looks like the one below. It will still be warm so you should coat it in a light layer of Crisco, wrap it in plastic wrap and refrigerate it for at least 30 minutes before use.
I hope that the images made the marshmallow fondant process more visual and easy to understand. If you try it out - let me know how you get on!