KITH stands for Knife In The Hat. The ones that take place on the forums are a modern rendition of an old hammer-in practice where the 'smiths that got together would each bring something that they had made/forged. They'd place the item in the hat, then each would take a turn drawing out an item that another had made.
In that spirit, the forum KITH's are usually done the same way. Each participant makes a knife, the organizer selects the participants at random, and each person sends a knife to someone, and in turn receives a knife from someone else. It's done in good fun, with no pressure (except the deadlines!)