Producing coloured stripes in Fair Isle knit creates complex colour interactions, where changing one colour in a design can dramatically change the viewer's perception of the pattern. This can be explained in part through established colour and pattern theory, and the most interesting effects occur when colour theory interacts with pattern theory to cause figural ambiguity, or to disrupt the Gestalt principles of "belongingness" (Kanizsa, 1979). The originality of this work stems from situating the theoretical exploration in the unique structure of Fair Isle knitted fabrics. The research utilises a design methodology, which recognises the importance of tacit knowledge, intuition and creativity. It suggests metrics to assess the success of the research and communication methods that are appropriate to a design audience. Outcomes of the research include results for formal experiments, exhibitions and collaborative, performance workshops, confirming and explaining the inter-relatedness of knitted fabric, pattern and colour in the perception of Fair Isle knitted fabrics. The research identifies Performance Craft, a new concept for design research and dissemination.