The lead inside a pencil is made of a combination of graphite and clay. Fine graphite particles are mixed with the clay to form a paste. The paste is fired in a kiln and treated with wax.
Originally, small lead discs were used to rule paper before writing was performed using a brush and ink. After the discovery of pure graphite in 1564, the use of lead discs for marking was discontinued.
Graphite is a very soft mineral. It is made of carbon, which flakes off when pressed to paper. Sonora, Mexico is famous for its particularly fine graphite production.