means The craft of making fabric or garments by interlocking loops of yarn with two or more needles.

from From the Old English verb cnyttan, 'to tie in a knot,' which is exactly the family knitting belongs to — it's a close cousin of 'knot' itself. The sense slid over time from 'fastening things together' to the specific art of looping yarn into cloth; you can still feel the original meaning in phrases like a 'closely knit' family, where people are bound rather than fabricated.