There are many ways to knit for charity, and I really can't do enough to encourage them all. Hats, scarves and blankets and shawls for those who are freezing or lost or in need of comfort are always something that will make a small difference in someone else's life. There is another way for knitters in particular to make a difference, though. Stephanie Pearl-McPhee (a/k/a the Yarn Harlot) organizes Knitters without Borders, a way in which knitters get together to support Doctors without Borders. She has put out a new challenge to the knitters who read her blog.
If you don't knit, you can still give to Doctors without Borders.
(My other favorite charity is the Heifer Project, in case you were wondering.)