The trick to two-color knitting is to run the strand at the back of the fabric loosely. If you don't concentrate very closely on keeping the strands loose, the fabric will pull in tightly and have no stretch over the two-color part.

This is particularly critical if the piece you are knitting has a one color section, followed by a two color section. What will happen is that the two-color stranded knitting will pucker in tightly, leaving the one-color knitted section crimped. Your piece will not lay flat, or look good when you are wearing it.

It's really hard to keep the strands from pulling tight. One way to help with this is to use a larger needle on the two-color stranded knitting part. 

Beautiful Two Color Knitting

Two color knitting is beautiful. Some of our most precious knitted items are done in the two color stranded knitting technique. Don't hesitate to take up a two color knitting pattern. The finished item is so satisfying, that it is well worth the effort.