It is in the Knitter's Book of Finishing Techniques by Nancie M. Wiseman. I will try to explain but you really need the pictures to understand (or at least I did).
Using a cotton yarn that is a different color than the yarn you plan on using, cast on half of the number of stitches plus one using the chained cast on method.
With the project yarn, knit one row, purl one row, and knit one row.
Then... **purl first stitch, insert the right needle in the bottom purl stitch of the project yarn (will be at the bottom surrounded by the cotton yarn) from the top to the bottom of the purl stitch.
Put the stitch on the left needle from front to back and then knit the stitch.
Repeat from **