For the uninitiated, pencil masking is simply taping the neg in the carrier (better to have a glass carrier) then taping a piece of frosted mylar over the glass. Place the sandwich over a lightbox and dodge whatever you wish with a soft (or hard) pencil. Once you get it the way you want it, you can make any number of prints that are basically the same. I really use it though for very small areas or complex shapes that need to be dodged which are impossible to do any other way.
My favorite diffusion material is the frosted side of the Print-File 4x5 individual sleeves. Since it isn't so opaque it doesn't effect the exposure like frosted mylar. It also allows the pencil lines to be more precise due to the same fact.
Here is a before/after example of a print that probably could not be made any other way. There are other methods going on here too, but the main manipulation is done with a mylar mask. They are cropped differently as well. Straight proof scan/print scan. You can see how low in contrast the negative is. Hope this helps.
Devil's Wind, Death Valley 1998