In the picture
you line to, the contrasting yarn is being used to hold live stitches. This waste or scrap yarn is used in place of a stitch holder. Later, the knittier will go back and place the held stitches back on a needle and continue knitting with them (on the sleeves in the picture for example).
You could also use this technique to hold stitches for a seam, say at the shoulder and then use 3 needle bind off
to join the live stitches.