curiously, one pattern (k1, YO, K2tog) has 2 uses!
in the middle of a peice of work, it will make a pattern of eyelets, (border (top and bottom) these eyelets with rows of garter stitche (purls on right side of work) and you get a third pattern, commonly called "beading")
but i digress.
one pattern has 2 uses.
in the middle of the work, (in a feild of knit stitche or really any stitch) its makes a set of holes--great for pulling a drawsting through.
at the end/edge (actually about 4 to 5 rows from edge, it makes a natural fold line.. and when you fold along the fold line, you get a picot (zig/zag, little pointed edge)
so first you work the pattern (there are detail for centering it, (the k1's at beginning and end) and then work the pattern for drawsting eyelets.
a few rows latter, you repeat the same pattern, followed by a 5 rows of stocking knit stitch.
(the part that doesn't make sense is putting all the stitches onto the gail (unless its just a holder till latter when you finish)
has a picot edge at the bottom hem.