From Wikipedia:  Knob-and-tube wiring (sometimes abbreviated K&T) is an early standardized method of electrical wiring in buildings, in common use in North America from about 1880 to the 1930s.^[1][2] It consisted of single-insulated copper conductors run within wall or ceiling cavities, passing through joist and stud drill-holes via protective porcelain insulating tubes, and supported along their length on nailed-down porcelain knob insulators. Where conductors entered a wiring device such as a lamp or switch, or were pulled into a wall, they were protected by flexible cloth insulating sleeving called loom.

For early wiring, knob and tube did the job, but it was new a long time ago, and as we know, all things age.  Wiring that is 100+ years old in itself is a safety hazard, but is not against code.  Knob and tube wiring in contact with insulation is not allowed, but if not it still, technically is allowed.  The problem at this point is insurance companies.  Only a handful of companies still exist that will insure knob and tube, and at higher rates.  Basically, it needs to go.  The two most obvious places to find knob and tube are the basement, before going up into the walls and the attic where it often times is exposed.  Unfortunately, it can be present inside the walls and not visible.  Please visit cornerstonehi.com for more information or to schedule an inspection.