There are many reasons you might choose to knit with two strands of yarn at the same time. It's an easy way to add thickness to a project, which will make it more durable and warm, like my Moss Stitch Headband, which uses two colors of the same yarn knit at the same time.
Adding color is another reason you might want to work with two or more strands, which automatically makes a project look more interesting than if it were worked with a solid color.
Sometimes, the same two colors are held throughout, or you can change one or more of the colors as you go to create an ombre look or just a more dynamic combination as in this baby poncho.
You can combine more than two yarns to make a super stash-busting project like my Favorite Color Scarf, which uses strands of four different colors held together and worked on giant size 50 US knitting needles.
Trouble With Twisting
It can be a little tricky, however, to work with two or more strands of yarn at once, mostly because of the trouble with twisting. The yarn strands automatically twist together as you knit with them; as this goes on, your working yarns will get incredibly twisted, which can be really frustrating.
The good news is this doesn't make a lot of difference in the finished fabric, so you don't have to worry about trying to straighten out the yarns each time you make a stitch, which would drive you crazy anyway.
You can attempt to avoid this problem (or at least limit it) by winding the two yarns together into one ball or even buying a yarn that's made of multiple strands wound together. Another option is to put each yarn ball into a zip-top bag or a plastic tub with a hole cut into the lid. Feed the yarn through the hole in the lid or a hole cut in the bag. This limits the contact the strands can have away from the needle, cutting down on the twist.
If you're getting a big tangled mess when knitting with two strands of yarn held together, stop at the end of every row or every other row and untwist. This will make the yarn a lot easier to work with as you proceed.
When it comes to the actual knitting, working with two or more strands at once is exactly the same as knitting with a single strand, though it can feel kind of awkward to start with.
The main thing to remember is that each stitch consists of two loops, so every two loops on the knitting needle are actually one stitch. If you start knitting each loop as a single stitch, you will rapidly have a project that is much bigger than you expected (though I have seen this used as an intentional method for increasing stitches quickly, that's not usually the goal).
Likewise, as you knit each stitch you should be using both strands of yarn to knit each stitch. If you drop one and pick it up later you'll end up with a strand of unworked yarn across your project. You can fix this problem in the same way you would picking up a dropped stitch.