Line.cs

public class Line
{
    public Point Start { get; set; }
    public Point End { get; set; }
    public int Width { get; set; }
    public Color Color { get; set; }
}

LineControl.cs

public class LineControl : Panel
{
    private readonly List<Line> lines = new List<Line>();
    private readonly ComboBox colorPicker = new ComboBox();
    private readonly NumericUpDown thickness = new NumericUpDown();
    private readonly ComboBox toolPicker = new ComboBox();

    public LineControl()
    {
        colorPicker.Items.AddRange(new object[] { Color.Black, Color.Red, Color.Green, Color.Blue });
        colorPicker.Location = new Point(0, 0);
        colorPicker.Width = 100;
        colorPicker.DropDownStyle = ComboBoxStyle.DropDownList;
        colorPicker.SelectedIndex = 0;
        colorPicker.DisplayMember = "Name";
        Controls.Add(colorPicker);

        thickness.Location = new Point(110, 0);
        thickness.Maximum = 10;
        thickness.Minimum = 1;
        thickness.Width = 50;
        thickness.Value = 1;
        Controls.Add(thickness);

        toolPicker.Items.AddRange(new object[] { Tool.Line, Tool.Pointer });
        toolPicker.Location = new Point(170, 0);
        toolPicker.DropDownStyle = ComboBoxStyle.DropDownList;
        toolPicker.Width = 60;
        toolPicker.SelectedIndexChanged += OnSelectedToolChanged;
        toolPicker.SelectedIndex = 0;
        Controls.Add(toolPicker);

        // Optimize drawing and reduce "flickering" when doing lots of paints.
        SetStyle(ControlStyles.UserPaint, true);
        SetStyle(ControlStyles.AllPaintingInWmPaint, true);
        SetStyle(ControlStyles.DoubleBuffer, true);
    }

    private void OnSelectedToolChanged(object sender, EventArgs e)
    {
        switch (GetSelectedTool())
        {
            case Tool.Line:
                Cursor = Cursors.Cross;
                break;
            case Tool.Pointer:
                Cursor = Cursors.Default;
                break;
        }
    }

    private Tool GetSelectedTool()
    {
        return (Tool)toolPicker.SelectedItem;
    }

    protected override void OnPaint(PaintEventArgs e)
    {
        // Reset the background.
        e.Graphics.Clear(Color.White);

        // Smooth the lines.
        e.Graphics.SmoothingMode = SmoothingMode.AntiAlias;

        // Draw each line.
        foreach (var line in lines)
        {
            using (var pen = new Pen(line.Color, line.Width))
            {
                e.Graphics.DrawLine(pen, line.Start, line.End);
            }
        }
    }

    protected override void OnMouseDown(MouseEventArgs e)
    {
        switch (GetSelectedTool())
        {
            case Tool.Line:
                OnLineToolMouseDown(e);
                break;
            case Tool.Pointer:
                OnPointerToolMouseDown(e);
                break;
        }
    }

    private void OnLineToolMouseDown(MouseEventArgs e)
    {
        if (e.Button != MouseButtons.Left) return;

        // Start the drag operation of the new line.
        var dragLine = new Line();
        dragLine.Color = (Color)colorPicker.SelectedItem;
        dragLine.Width = (int)thickness.Value;
        lines.Add(dragLine);

        dragLine.Start = dragLine.End = e.Location;

        Refresh();
    }

    private void OnPointerToolMouseDown(MouseEventArgs e)
    {
        // TODO...
    }

    protected override void OnMouseMove(MouseEventArgs e)
    {
        switch (GetSelectedTool())
        {
            case Tool.Line:
                OnLineToolMouseMove(e);
                break;
            case Tool.Pointer:
                OnPointerToolMouseMove(e);
                break;
        }
    }

    private void OnLineToolMouseMove(MouseEventArgs e)
    {
        if (e.Button != MouseButtons.Left) return;

        // Move the end point of the new line.
        var dragLine = lines.Last();
        dragLine.End = e.Location;

        Refresh();
    }

    private void OnPointerToolMouseMove(MouseEventArgs e)
    {
        // TODO...
    }

    protected override void OnMouseUp(MouseEventArgs e)
    {
        switch (GetSelectedTool())
        {
            case Tool.Line:
                OnLineToolMouseUp(e);
                break;
            case Tool.Pointer:
                OnPointerToolMouseUp(e);
                break;
        }
    }

    private void OnLineToolMouseUp(MouseEventArgs e)
    {
        if (e.Button != MouseButtons.Left) return;

        // Finish the drag operation of the new line.
        var dragLine = lines.Last();
        dragLine.End = e.Location;

        Refresh();
    }

    private void OnPointerToolMouseUp(MouseEventArgs e)
    {
        // TODO...
    }
}

MainForm.cs

public class MainForm : Form
{
    public MainForm()
    {
        SuspendLayout();

        var lineControl = new LineControl();
        lineControl.Dock = DockStyle.Fill;
        this.AutoScaleDimensions = new System.Drawing.SizeF(6F, 13F);
        this.AutoScaleMode = System.Windows.Forms.AutoScaleMode.Font;
        this.ClientSize = new System.Drawing.Size(500, 500);
        this.Controls.Add(lineControl);
        this.Text = "Main Form";

        this.ResumeLayout(false);
    }
}

Program.cs

public static class Program
{
    [STAThread]
    static void Main()
    {
        Application.EnableVisualStyles();
        Application.SetCompatibleTextRenderingDefault(false);
        Application.Run(new MainForm());
    }
}

Tool.cs

// These should be classes so we don't have to do the "switch" statements.
public enum Tool
{
    Line,
    Pointer
}