When you're using more than one skein of hand-dyed or variegated yarn for a project -- anything where the skeins may not match exactly -- you'll probably want to alternate skeins. That way, the skeins are mixed together in your finished piece, making any differences between them less noticeable and breaking up any pooling that might occur. Even if you don't want to alternate skeins throughout your project, doing so for a few rows as you transition from one skein to the next will help disguise the change.
The tips here will also help when you're knitting a striped project by alternating between two different colorways (as opposed to self-striping yarn!).
How to Do It
To alternate skeins, all you do is frequently switch which cake you're working from. If you're knitting in the round, that would be every round. If you're knitting flat, that would be every other row. Alternating frequently means you won't have to carry the non-working yarn very far. Plus, of course, it ensures the skeins are well blended in your knitting!
Things to Watch Out For!
There are a couple of things that can make alternating skeins a little tricky. The first is to do with yarn management, as the two cakes attached to your knitting can get a bit twisted as you go. Just stop now and then and untwist the two yarns. No biggie.
The other potential issue is that particularly when you're working flat, the edge you're carrying the yarn up can get tight. Not necessarily an issue, but with something like lace, where you want to give it a nice, firm blocking, a tight edge can distort your FO. The trick here -- on top of carrying the yarn as loosely as you can -- is to add a little extra yarn into the mix! You can do this by working a yarn over after the first stitch you knit once you've switched skeins. On the next row, just drop that yarn over. The little bit of extra yarn it provides helps keep that edge loose.
For example, let's say you are working in stockinette stitch. The first time you're ready to change skeins (which, if you're alternating from the beginning of your project, would be row 3), you would do the following:
Row 3: K1, yo, k to end of row
Row 4: P to last 2 sts, drop yo, p1
One final tip: If you're working on a project with an odd number of skeins (say, three), just alternating two skeins until they run out will leave you with one lonely skein and nothing to alternate it with. Consider switching out one of your working yarns once you've used up half of the cake, switching one out for the third cake, and then re-joining the remaining half when cake #2 runs out. It would look something like this:
First third of piece: skeins 1 & 2
Second third of piece: skeins 1 & 3
Final third of piece: skeins 2 & 3
Follow these pointers, and alternating skeins should go smoothly for you!