Because I'm an incurable academic, let's start off with some words, and their knitterly definitions. These definitions will probably be updated as I think of new things, or as suggestions come in for words I've missed. Additionally, this may serve well as a lexicon for those among us who love a knitter, but who (inexplicably) do not love to knit.
Bind off: the act of tacking down loops of yarn left when your knitting is complete, so they can be freed from your needles and not unravel into a big mess. Often abbreviated BO, and, to my knowledge, synonymous with "cast off."
Blocking: the act of shaping your knitting so that it looks its best. Blocking is accomplished by getting your knitting wet (but not sopping wet - damp is usually fine) and pinning it into place stretched to dimensions specificed in your pattern on a surface like a bed or a clean rug. One then very patiently lets the knitting dry completely, then unpins it from the surface. This is a crucial step for lace, which can and does look like a scraggly bunch of crap until it's blocked. It is also important for other projects, but lace is where blocking has the most magical effect. You can also steam block your knitting, which is supposed to be a pretty fabulous way to block, but I don't have a steam iron, so I can't tell you any more about that.
Cast off: see "Bind off."
Cast on: the act of putting loops of yarn on the needles so you have something to knit. There are a number of ways to do this, but I confess that I only know one, and it's served me well so far. Often abbreviated CO.
Circular knitting: the best way to knit ever! No, seriously, circular knitting is just like regular knitting, except using differently shaped needles that form a circle. Instead of flipping your work back and forth, you knit continuously in a spiral, always working the "right side" of your knitting. If you're knitting anything tubular (socks, sweater, even double-thickness scarves), this way avoids sewing seams. Also known as knitting in the round.
Decrease: to subtract a stitch (or stitches) from a row of knitting. There are a number of ways to decrease, each of which slant in a different direction, or have a different appearance. I have found the proper selection of a decrease stitch to be more important to the final appearance of your knitting than the selection of an increase method.
DPNs (double pointed needles): just what they sound like: needles that have points on both ends. Usually shorter than regular straight needles, and often used, in sets of 4 or 5, for knitting circularly.
Dropped stitch: what happens when a loop of yarn fall off your needle, and that column of stitches unravels. May be purposeful or accidental, but in the latter case, is easily fixed with a crochet hook. Don't sweat it.
Felting/fulling: the act of washing your wool knitting in hot water with agitation, so it shrinks and the fibers pull together. Felted knitting is very sturdy and can even be cut as one would cut any other fabric. Often used to make bags like this, since felted knitting doesn't stretch or pull out of shape, but also a useful technique to make housewares (pillows, coasters, placemats, etc).
Finishing: a term encompassing all the non-knitting stuff required to turn your knitting from a big heap of knitted fabric into a Finished Object. Includes sewing seams, crocheting edges, weaving in ends, attaching buttons, etc.
Increase: to add a stitch (or stitches) to a row of knitting. Can be performed by the "make 1" method, casting on extra stitch(es), knitting into the front and back of a stitch, or making a yarnover. Each method has its pros and cons. Sometimes the method used is not particularly crucial, and other times it's integral to the character of your knitting.
Knitting: the act of pulling loops of yarn through other loops of yarn, using needles or other stick-shaped objects. (This definition is paraphrased from the incomparable Stephanie Pearl-McPhee.) While kind of obvious, this does bear remembering, especially when trying to fix mistakes (see "Dropped stitch").
Knitting in the round: see Circular knitting.
Lace: knitting formed by a series of increases (usually a yarnover) and decreases, yielding a fabric with lots of holes in it. Often, the increases and decreases are balanced, so while you're subtracting and adding stitches, the number of stitches per row stays constant by the time you've finished the row. Additional terms you might see are lace knitting and knitted lace. These are generally taken to mean that, for the former, you makes these increases and decreases on one side of the fabric only (that is, every other row), while for the latter, you're increasing and decreasing every row.
Side (as in, right side or wrong side): often abbreviated RS or WS, this denotes the side of the fabric you're knitting. For something like a sweater, there is a definite right and wrong side. For a scarf or afghan, the pattern may be more reversible. Important both for constructing multi-piece Finished Objects (like a sweater) and for following the pattern, which will often say something like, "On the next RS row, dec 1 st at beg of row." You are "on" the right side when, as you hold your needles ready to knit, the right side is facing you.
Stitch: one loop of yarn pulled through another. There's really just knit, purl, and variations on that theme. Often abbreviated "st" and, plural, "sts."
Weave in ends: a phrase, explicit or implied, at the end of every knitting pattern in existence. Seemingly a simple imperative, I found out there are many unattractive ways to do this. The right way involves a darning needle and "sewing" your ends into your knitting so that the end follows the path of an already-knitted piece of yarn. See my "Techniques" post for links to some guides on how to do this well.