Depends on the knit. I admit, I'm not good at folding, and keeping things folded when I go searching through a drawer of folded items. So through experience if a knit tends to wrinkle easily, then it gets hung up. If it doesn't wrinkle that much, then it gets folded and stuffed in a drawer. Generally (but not always) it seems my better knits are hanging, and the inexpensive knits are in drawers.
I did have a bunch of layering tees from BR, very nice quality, and those things wrinkled like you would not believe, no matter how carefully I tried to keep them folded.
Also the heavier the knit the more likely I am to fold rather than hang. Like my two knit maxi dresses: they don't wrinkle at all, but the jersey is substantial enough, if I leave them on hangers, they stretch out from the weight of all that fabric.
Sweaters and sweater dresses: always folded or rolled. They don't stretch out that way, don't get those weird dimples in the shoulders, and take up much less space. I've mentioned this numerous times, but here I go again: I got two of these to store my folded sweaters -- but the less expensive kind...
http://www.pbteen.com/products/wire-rolling-cart/
And the carts fit nice and neatly under my shirts and jackets. I can roll the cart in and out to see everything, re-fold, etc. And the wire mesh allows air to circulate around the sweaters.
