Place marshmallows and 2 tablespoons of water in a microwave safe bowl. Microwave 30 seconds on high; stir until mixed well. Continue microwaving 30 seconds more; stir again. Continue until melted (about 2 1/2 minutes).
Place 3/4 of the powdered sugar on top of the melted marshmallow mixture. Fold the sugar into marshmallow mixture. Flavoring can be added at this point if desired.
Place solid vegetable shortening in an easily accessed bowl so you can reach into it with fingers as you are working. Grease hands and counter GENEROUSLY to keep the mixture from sticking to your fingers; turn marshmallow mixture onto counter. Start kneading like you would dough. Continue kneading, adding additional powdered sugar, and re-greasing hands and counter so it doesn't stick.
Tip: The dough is too dry if it tears easily. Add 1/2 tablespoon of water at a time and knead until it forms a firm, smooth elastic ball that will stretch without tearing. Knead for about 8 minutes.
To color (optional): If you need to color the entire batch, add a little icing color or food coloring to the mixture. For smaller amounts, add icing color to portions as needed.
It's best to allow your fondant to sit, double-wrapped, overnight. This allows the fondant to relax and develop to hold its shape when decorating. Coat the dough with a thin layer of solid vegetable shortening, then wrap in plastic wrap and place in a resealable bag. Squeeze out as much air as possible.