Yes, it is cross-stitch. I started with using three threads, then went down to two threads and then changed to a different type of yarn and used three threads again.
The Mario and Peach figures were stolen from pictures found on the Internet. The Koopa was once scribbed off the SMB manual (it has all the main characters as grey-scale patterns) and reduced to fit into a 12x21 C64 multicolour sprite. The logotype was adopted from the real thing, obviously.
But all these were small pixelated images, one pixel per stitch. To make it into a pattern, I took the following steps in Adobe Photoshop:
1. Multiply image size by eight (working in indexed colour)
2. Define a set of 8x8 fill patterns, like O X # % and so on.
3. Use magic marker to highlight all areas of one colour (tolerance 0) and use the paint bucket tool to fill those areas with a selected pattern.
4. Write down which pattern represents which colour.
5. Define one more 8x8 pattern that acts like a grid.
6. Open a new layer, use the paint bucket to fill this layer with the pattern.
7. Merge layers, and you have an image consisting of a printable grid plus patterns.
Of course I could print the image without replacing colours by patterns if I had a colour printer, but in this way it was printable with any printer, and more alike how these cross-stich patterns usually are presented.
I'm already toying with the next idea for a pattern. Perhaps a VIC-20, if I can find a nice cream coloured yarn.