The way in which a yarn turns into knitted fabric, or the characteristic of the yarn when it is knitted. How the yarn looks and feels when it has been knitted into stitches.
For example:
“This yarn knits up really soft” = “This yarn feels really soft when it’s in a knitted garment.”
“This yarn knits up really fast” = “This yarn is so thick that if you knit a project with it you will finish really quickly.”