I was once watching a play in a very intimate theater setting and two girls in the very front row were knitting with metal needles through the whole first act. They were so close to the performance area that the stage lights occasionally hit them. The entire audience could hear them knitting. As an obsessive knitter myself--I found that inappropriate.
The stage manager had to ask them to stop at intermission b/c the actors could see and hear them and it was distracting. That's pretty clueless and disrespectful, imo.
But as a general rule--I think you can knit pretty much anywhere so long as you are aware of your surroundings and your company. If it becomes clear that you are bothering others, put the needles away. I have, for example, knitted away in a dentist office waiting room too. And there were TWO other women doing the same!