Oh, the vast majority of students definitely are well aware. His classes are in high demand and regularly fill up quickly and spill into wait-lists, come registration time.

It's been about a decade since I attended, but IME I felt there were many undergraduate courses that were competently taught by overqualified luminaries in their fields (meaning, for those examples, you could probably get the same quality education from a much cheaper institution), but Prof. Kernighan's classes stood out as among the 2-3 truly unique and special highlights of a Princeton CS education.

OTOH, there's nothing quite like disappointing professors in their own classes while studying their own eponymous algorithms (sorry Prof. Tarjan... it's not you, it's me).