Place the shortening in a shallow bowl, and set aside.
Place the marshmallows in a large microwave-safe bowl, and microwave on High for 30 seconds to 1 minute to start melting the marshmallows. Carefully stir the water and vanilla extract into the hot marshmallows, and stir until the mixture is smooth. Add gel color now if needed.
If using marshmallow fluff,just skip melting the marshmallows, the water, and the vanilla. Refrigerate the marshmallow fluff overnight, then add to a bowl sprayed generously with oil. Add gel color if needed. Slowly beat in the confectioners' sugar, a cup at a time, until you have a sticky dough. Reserve 1 cup of powdered sugar for kneading. The dough will be very stiff.
Rub your hands thoroughly with shortening, and begin kneading the sticky dough. As you knead, the dough will become workable and pliable. Turn the dough out onto a working surface dusted with confectioners' sugar and continue kneading until the fondant is smooth and no longer sticky to the touch, 5 to 10 minutes.
Form the fondant into a ball, wrap it tightly in plastic wrap, and refrigerate overnight. To use, allow the fondant to come to room temperature, and roll it out onto a flat surface dusted with confectioners' sugar.