I am still at a point where I have to focus on the knitting, so right now the most I can do while knitting is listening to music that I need to learn, or participating in a conversation that does not take 100% of my brainpower.
EDIT: Revelation. I can also play idle/incremental games while knitting.
Honestly I’m usually knitting fairly simple things so can listen to music, watch TV, chat to partner or even be in a group conversation or whatever without too much trouble. Just about the only thing I can’t do is read, but that’s only having two hands for you!
It does cause occasional mistakes, but I’m ok with ripping out where necessary and just living with small mistakes where not, so that’s fine.
On those few occasions I attempt complicated lace, though, oof. Any sort of distraction at all is a day-ruiner!