Here is some bulky weight merino that I dyed up for my class at the Senior College at USM. I called it Dreaming in Color and it covers the four basic techniques for knitting in color. Fair Isle or stranded knitting is a pretty old and familiar technique and is easier than it appears. This is what most people think of when you talk about two color knitting. The little mittens in the picture below are knit using this technique and come from the book Favorite Mittens by Robin Hansen which I picked up at KnitWits here in Portland.
Favorite Mittens is one of my Favorite Books because it has traditional Maine patterns, and because it tells you how to scale the mittens up and down in size. The green and white socks are a Turkish sock pattern that I bought from Afghans for Afghans and they create socks that have to be seen on chubby two year old legs to have all of their charms fully appreciated. The blue and brown square in the center is a piece of Reversible Knitting. M'Lou Baber's Double Knitting is an excellent book on this technique. The garments that she designs are beautiful and timeless.
And here is a sample piece of Slip Stitch Knitting where I pulled some stitches from the knitting classic by Barbara Walker The Treasury of Knitting Patterns. With this technique you are never actually knitting with more than one color. The slip stitches create the changes in the colors. I am currently working on a cover for my I-pad using slip stitch patterns. I will show you when I'm finished. The Treasury is an excellent resource. I have had my copy for almost 40 years and it feels like a sacred relic to me of my early knitting history. I have not yet bought all the other Treasury books that follow (I believe there are 4?) but I should....and I will.