I took photos of my own lips so that you can see the different effects on coloring inside and outside the lines. I used a matte red lipstick so that the effect is more obvious:

These are my puckers without lipstick. As you can see, there are 2 obvious lines. The one that is where my obvious natural lip line is (the pink colored part), and the outer part which looks like a highlight.

With a lipliner pencil that matches my lipstick almost exactly the same, I lined my natural lip line and filled in my lips with that same pencil. Then, I topped it off with my red lipstick so that the color will last longer, and give a bolder look.

I concealed the outside part with a concealer pencil to better show you which line I was referring to. By doing this technique, the effect is to make my lips look thinner. This is the method I use actually because I have full lips. I also conceal the outer part and set it with my pressed powder to blend it and make it look more natural.

The other technique is by lining the outer line with the pencil and filling it in, topping it with your lip color to achieve the full-angelina jolie-esque lips. I hardly use this method because it tends to over power my over all look. Using bold colors like red, bright pink, or even other natural nude colors can make your lips look bigger.

So if you would like to make your lips appear thinner, better to stay inside the lines.

By concealing the outline of your lips will allow you "draw" the shape you desire. Just remember to try to avoid reconstructing your whole lips altogether because whether or not you master this, it will always look un-natural.

Remember to blot and reapply for a long lasting wear!