In the last week, half of the home inspections that I performed in Bellingham were at houses with knob and tube wiring systems. The minute I say that, the inspectors know that the houses I inspected were at least 50 years of age.
Knob and tube wiring, the first wiring system to be used on a widespread basis (after Thomas Edison figured out the light bulb) is a relic, an antique. However, that does not mean it is not commonly found. I own five residences, one a duplex and one house I inherited, and three of the five houses still have at least some live knob and tube wiring, including the house I live in. When I moved in, mid-1970's, knob and tube was not that many years out of the norm. So the insurance companies thought of it as no big deal.
The photo below shows something you really do not want to see with knob and tube wiring , although found more often than not, someone has spliced modern cable into the original system. This is, typically, done by amateurs who do not really understand the system and the limitations.
When the inspector reports energized knob and tube wiring, a potential purchaser should seek out an electrician to further review the wiring at the house. Even if the electrician says it is not so bad, for knob and tube at least, many insurance companies will not insure this old system or, if they do, they will want a pretty penny for the premium. The knob and tube system, unless someone has been fiddling with it, will not have an equipment ground -- that third slot that is found on modern receptacles.
For additional information on this antique that is still commonly found today, please click on the video link.