This scarf is a combined knitting & crochet project.

The flowers are added at the beginning of every 12th row by taking the last stitch off the needle and using it as a chain stitch to crochet from. After two flowers have been crocheted the stitch is slipped back on the knitting needle and knitting is continued in a normal way.

I have written a small tutorial on how to crochet the flowers on my blog: http://knitting-and-so-on.blogspot.com/2012/04/tutorial-flowers-for-falling-blossoms.html