pillow shading is when you shade a shape jsut buy going around the outline and gradually moving in with brightter and brigher shades. its a usual method when people aren't really aware of how to properly shade some volumes.
thus the usual frase "pick a light source and shade accordingly". if you chose a light source position, you automatically respond to that while shading
still, I dont think you are doing pillowshading on porpouse, but there are some areas that look a bit pillowie. specially how you put dark shades around the shapes.
for example the hair of your avatar could be considered pillow shaded.
as for too many colors, dont worry about that. first try and shade it, then think about economy. once you understand the concept of light and shadow it will be easier for you to be cheaper with the colors
