We don't do TV - got rid of cable, don't have an antenna, but we do watch the occasional DVD and I always knit during those.
I watch my kids play while I knit (though they frequently make it impossible for me).
I knit between sets of weight-lifting (in little one-minute increments, wearing weight-lifting gloves, no less, but hey, whatever it takes to feed my addiction).
I knit in the car while dh drives (so far have resisted the urge while I'm driving).
I knit during meetings or sometimes at social gatherings (if it's just a group of women hanging out having coffee - not like a major Christmas party or anything!
But honestly, my favorite thing to do while knitting is nothing else. I like to get up early before anyone else is awake, and sit in my recliner with a cup of coffee, and enjoy the silence while I knit.