If you're knitting in the round this is the method I use to knit fair isle. The problem with knitting in the round is that you usually carry the yarn all the way around and if you're doing a single O then you might not want to.
http://www.philosopherswool.com/Page...andedvideo.htm
If you're knitting flat so you'll seam then you'd use fair isle method. There's a video under advanced techniques on the tab at the top of the page.