Knitting with two colors at the same time is called Stranding. The Stranding method was formerly referred to as "Fair Isle" method.
Work all sts in Stockinette st, changing the color as indicated on the graph. Each square on the graph represents one stitch.
1. The two strands of yarn before twisted (right side).
2. When changing from one color to another, make one twist of the two strands of yarn to prevent a hole where the colors change (rigth side).
3. The two strands of yarn before twisted (wrong side).
4. The two strands of yarn after twisted (wrong side).
Intarsia is a knitting technique used to create patterns with multiple colours.
Unlike other multicolour techniques (including Fair Isle, slip-stitch colour, and double knitting), there is only one "active" colour on any given stitch, and yarn is not carried across the back of the work; when a colour changes on a given row, the old yarn is left hanging. This means that any intarsia piece is topologically several disjoint columns of colour; a simple blue circle on a white background involves one column of blue and two of white---one for the left and one for the right. Intarsia is most often worked flat, rather than in the round. However, it is possible to knit intarsia in circular knitting using particular techniques.