Cel-shading is a process applied to regular models to make them look hand-drawn (as Vurt mentioned).

As far as I can tell, Torchlight and WoW don't use this process. The hand-drawn look is put into the textures themselves (which are actually hand-drawn / painted), and the engine rendering / lighting is tweaked to emphasize the hand drawn textures.

I remember reading some interviews with Runic where they mentioned no special shaders were employed in Torchlight. They create that painted look purely through texture work and simple lighting.