Like my bind-off, this cast-on is super-stretchy:
I've created a video to show you how to do it.
This video is also available on YouTube at http://www.youtube.com/watch?v=3n8E3I6Cg2k.
The basic premise of this cast-on is this:
2. Make another slip knot.
It's really as simple as that. But it's a little tricky getting the slip knots to all line up right next to each other on the needle. The video will walk you through the tricky parts.
The origin of this bindoff is somewhat of a mystery. Years and years ago I learned it, or something like it, from a book. I later forgot how to do it, and couldn't find the original resource I learned from, or any knitters who knew it, so I had to figure it out all over again by myself. This happened a few more times over the years. And I still can't find the resource, or any other knitter who uses this cast-on. So who knows if it's an original, or if it's some ancient cast-on, lost in the midst of time. It doesn't matter -- it's an awesome cast-on that every knitter should know about. If you've ever used or seen anything like it, please post a comment!
Warning: This cast-on is a bit finicky about the kind of yarn you use. You should use yarn that is a smooth texture and uniform in width. Trying to do this cast-on with yarns like chenille, or any of the yarns shown here, will give you nightmares!
ADDENDUM 9/28: Now that this post has been up for a few days, other knitters who know this cast-on (or very similar) are coming out of the woodwork. Yaaay, I knew you were out there!
Check out this video: http://www.youtube.com/watch?v=DKwYH-vqJL0
The author twists the yarn around the needles with a different set of motions, but the end result is, in fact, the same.
ADDENDUM #2, 10/4: A-HA! Confirmation that yes this does in fact exist in print. See Montse Stanley's Buttonhole Cast-On, p. 76, fig 2.37.