[bumby]

I have heard the real reason was to avoid electrical shorts. Pencils inevitably have bits of conductive graphite breaking off and floating about, potentially damaging electrical components

[hwayne]

Wikipedia has a great article on this: https://en.wikipedia.org/wiki/Writing_in_space

[bumby]

Interesting read! Although it isn’t clear what the combustion source is based upon, on-orbit conditions are generally different from STP and combustion effects may not translate