Well fortunately the majority of highly toxic chemicals used in pens and pencils (such as lead in pencils) has been removed for precisely this reason and to prevent children from inadvertently poisoning themselves. Thus writing on yourself occasionally is unlikely to cause any major damage.

However at the same time the skin is highly absorbent and that means that anything you do write with is still potentially going to enter the blood stream at least a little. This of course can be bad for your brain and organs, and repeated use could increase you chances of developing cancer as your cells come under fire from the toxins. Many things could give you cancer however, so it is almost impossible to avoid and the amount of ink you'd need to expose yourself to to be dangerous would be very large. This means there is no real reason to be concerned about writing on your skin, but you should still try to keep it to a minimum. To write on your skin without worrying about the side effects then a water based felt pen would be the safest one to use, while for larger works of art you should always go with face paints (apart from anything else these will show up better and will scratch your skin less at the same time).
Rachel.