A YARN OVER (YO) is the simplest method to make an increase. It consists simply of interposing your thread (yarn over) between two consecutive stitches, and working into it on the next row, creating a new stitch. YO is also widely used in lace knitting, ofter paired with decreases as ssk and k2tog.
When you are working a knit row, the YO is simply made by moving the thread under the right-hand needle then over it towards the back of the work. Look the step by step photos:
1) Knit to reach the place where the pattern that you’re following calls for a yo.
2) Move the yarn towards the front, under your right-hand needle, and then over it. This is what is called “yarn over“.
3) Insert the tip of your right-hand needle in the next stitch and knit it normally.
4) This is how the newly made YO looks from the front of the work:
5) And this is how the YO looks from the behind:
Once you reach it in the next row of your project, your YO will look like this:
Creating a hole in your knitted piece or not will depend on whether the YO is knitted using the front loop or the back loop.
You can see the following posts to know more: