It seems to me that it revolves around manipulating 2 sides at once.
You can manipulate 2 sides on straight needles to form a tube out of a single strand.
You could double knit with many different strands to make a lot of vertical stripes intarsia style, do many strands fair isle style or fake a fair isle style by reversing a 2 color design's colors from side to side.
Theoretically you could "double knit" an infinite numbers of layers, but I guess that would be triple, quadruple, etc knitting.
My guess is double knit yarn is called that so you can have the double layer without adding as much thickness.
I drew this to explain why it will make 2 sides to someone. http://www.flickr.com/photos/mykknit/3322550631/