Visual Long Multiplication
python, 303



def f(s):
    a,b=s.split('*')
    a,b=map(lambda l:reduce(lambda x,y:x+[1]*int(y)+[0],l,[0]),[reversed(a),b])
    n=sum(map(len,[a,b]))
    l=[[' ']*n for i in xrange(n)]
    for i,x in enumerate(a):
        for j,y in enumerate(b):
            l[i+j][j-i+len(a)]=r' \/x'[x+2*y]
    return '\n'.join(''.join(x[2:-1]) for x in l[1:-2])
  

I think it's enough human-readable.
Verification:  

print '---'
print '\n'.join('"%s"'%x for x in f('21001*209').split('\n'))
print '---'
---
"       \ /            "
"        x /           "
"       / x            "
"      / / \           "
"   \ / /   \ /        "
"    x /     x /       "
" \ / x     / x /      "
"\ x / \   / / x /     "
" x x   \ / / / x /    "
"/ x \   x / / / x /   "
" / \ \ / x / / / x /  "
"    \ x / x / / / x / "
"     x x / x / / / x /"
"    / x x / x / / / x "
"     / x x / x / / / \"
"      / x x / x / /   "
"       / x x / x /    "
"        / x x / x     "
"         / x x / \    "
"          / x x       "
"           / x \      "
"            / \       "
---