Knob-and-Tube
Knob-and-tube wiring is so named because of the porcelain fittings used to support and insulate the conductors from the timber components in the home. The knob holds the wire away from rafters and joists, while the tubes are inserted into holes bored though joists and studs to protect the conductor and its rubber insulation.
Knob-and-tube wiring was the common method used to wire homes in the United States prior to 1930.
Knob-and-tube is a two-wire system with a hot (ungrounded) and a neutral (grounded conductor) only. No separate ground is used, so all receptacles would have been two-prong only.
The home inspector should report any knob-and-tube wiring as in need of further evaluation by an electrical contractor due to the following reasons:
The insulation is often very brittle and leaves conductors exposed when disturbed.
All circuits are ungrounded, which will not suit many modern electronics, such as computers, televisions and stereos.
The conductors are often buried in attic and wall insulation. This is a problem, as they were designed to work in free air.
The wire gauge is commonly 14-awg only, which is not sufficient for most modern household needs.
It's very common for knob-and-tube wiring to have been added to over the years, and it may contain many splices outside of approved enclosures.