Begin by shading a fairly dark area. I always make my pencil strokes in line with the direction that I intend to draw the fur.
Erase patches of the shaded area in a jagged fashion. These will act as highlights later on.
Shade over parts of the erased areas to make them smaller and reshape them.
Smooth out the shading using a cotton pad or tissue.
Add hairs to the drawing. When drawing hairs near or over the lighter patches from the areas you erased earlier, I leave a small area bare to serve as highlights.
I decided to make some more prominent highlights so I erased some more patches of the fur in the same jagged style I used before.
Now add more hairs to cover the majority of the erased areas. Again, when drawing hair over erased areas, leave some small patches bare at the tips of the hairs to act as the highlights.
Changing the sizes of the erased patches during the process will change the density of the fur, as seen below: