People who are well-versed in fields like fashion will create original designs which include yarn requirements, needle size, measurements, stitch instructions, construction steps, etc etc and sell them in online marketplaces like Etsy or Revelry.
As far as I know they sell the patterns, not the finished knitted artifact. Aspiring knitters buy them to enjoy knitting. The physical representation of the pattern isn't worth anything (just a piece of paper), what you're buying is a license to use their intellectual property, so I'd say they're making money from copyright.