This type of electrical system was popular in home construction from the 1800’s clear up through the early 1940’s.  It was favored over conduit or armored cable due to its relative lower cost.  Knob and tube wiring (commonly called K&T) is characterized by an exposed, single insulated copper wire conductor attached to, or run through, ceramic knobs and tubes, without any type of grounding system.  This wiring system would be run through out the home between joists and in crawl spaces or under floors.  The ceramic knobs were used to hold the wire away from building materials to allow the heat in the wire to dissipate in the open air.  This is one of the main reasons that most states won’t allow blown in insulation upgrades to homes with existing K&T.  So due to perceived risk of fire, K&T is no longer allowed in residential applications in most states.  Even if it was up to code, it wouldn’t hold up under the demands of modern day appliance power requirements anyway.  Many insurance companies won’t insure, and some lenders won’t finance homes with active K&T.