Using multicolored yarn instead of a solid color yarn is a great way to add color to a knitting project without adding much work, but it's not always as simple as just knitting a project with a different yarn. Swatching with a multicolored yarn is vital before starting your knitting project -- and not just to ensure you're getting the proper gauge.
There are a wide range of effects found in multicolored yarns, from self-striping yarns to those that produce a mottled effect. To make sure you're going to like the yarn you chose in the knitting stitch used in the pattern, you need to knit a swatch in that pattern and take a good look at how the colors fall in that pattern.
You may find that wild colors compete with the stitch pattern, making it hard to see. Or the colors may pool, producing an unattractive blotch of one color right in the middle of your project (of course this may not happen in your project if it happens on the swatch, because a swatch will include fewer stitches than the finished project).
The photograph above illustrates this point. The bottom section is in Garter Stitch, followed by Stockinette, 2x2 ribbing and Seed Stitch. Each one produces a very different effect in the knit fabric.
For best results, knit a generous swatch -- mine is a good 7 inches wide -- and work each potential stitch pattern for at least an inch before deciding whether it's a good match for your yarn. This is also a great way to play with stitch patterns if you're designing your own knitting project, even if you're using a solid colored yarn.