I use Illustrator to create the art for each frame. I literally move the vectors piece by piece and save a file for every frame I create.
And then depending on the animation I either export each frame from Illustrator to a .png file (plug them right into Stencyl one by one). Or for more complex animations I copy and paste each frame into Photoshop. Photoshop has an awesome animation creator that works really good. This really helps for animations that having altering sizes. (A character doing a overhead swing).
I never really worked with or even like vectors until I started creating games. Using vectors have saved me so much time, resizing, changing color, altering animations and characters.