This is Purse Stitch.  It's being worked here into a scarf using Classic Elite Yarn  (Rain: silk, linen, cotton and rayon)  on # 10 needles (these  I cut down from foot- long needles to make hand-sized ones which are more comfortable to use being of a scale for this width of knitting). 

I love Purse Stitch.  On an even number of stitches all it takes is to purl two together with the yarn at the back of the work.  I love knitting this way and tend to refer to it as slow knitting or knitting playfully or knitting with attention.

Most knitting is done more like lickety-split-lickety-split-lickety-split  (which I also enjoy hugely) while slow knitting is more diddly…do…diddly…do…diddly…diddly…diddly….do…

F'r'instance, in the Purse Stitch, you have to keep watch of  what you are doing and rather encourage the wool along.  The yarn is put at the back of the work as if to knit but the right hand needle goes through the two stitches purl-wise.   With such loose work there is that sense of a casual playing rather than a business-like working;  the needle lifts both stitches in a bit of a stretch before the yarn is brought forward and around -  loosely, paying attention – and then when the needle ducks down and takes the yarn  back through the loops - dah dah – two new stitches are formed (because the yarn started out behind the work, not in front of it!) . And again those two new stitches are pulled into a bit of a stretch as they transfer onto the right hand needle.

It feels a bit like sculpting – I pull the work down with the thumb and forefinger of my left hand so that the two stitches waiting to be worked are drawn open and let the right hand needle insert easily.  Also – those two stitches are not just two ordinary, straight-up-and-down stitches – no, one of them is on a slant: there is a design on the needle already!  Try it, try it….it is very exciting to 'watch' knitting.  It's also relaxing, an alternative to times of frenetic knitting.

Here is where I first learned the Purse Stitch -in her second book,  Mary Thomas's  Book of Knitting Patterns.

Both books are absolutely wonderful!  I found them at different book sales many years ago and have a notion to do some research and find out just who Mary Thomas was.  The first book was  published in 1938 but I believe there have been reprints.