There are no new varieties of an item when the skill level increases. You get all the colour varieties for each item once you reach the skill level and unlock the item. Each item comes in every different colour. I love this pack so much. My favourite items are the baby onesies, mailbox cozies, beanies, toys, decoration stuffies, socks and sweaters. I love that you can rock in a rocking chair while knitting, donate the items to charity or sell them on Plopsy.
This is what I found on "the Ultimate Sims Guides":
Knitting Skill Level 1
When you’re in the first level of the knitting skill your sim is going to be able to create beanies that look like bears and tigers and are super cute.
Knitting Skill Level 2
At level two of the skill your sim unlocks the ability to knit socks. There are 3 types, the first is crew socks, then some low cut socks, and mid calf socks. All of which have a fail variant where the socks will be two different designs.
Knitting Skill Level 3
When your sim reaches level 3 they are going to unlock some fun objects, including hanging plant holders and mailbox cozies.
Knitting Skill Level 4
When your sim reaches level 4 of the knitting skill they are going to be able to knit rugs, including a fail variant that is all sorts of fun colours.
Knitting Skill Level 5
At level 5 of the skill your sim will be able to teach to knit to kids and other sims with a low skill. They will also unlock some new sweaters that they can create for men, women, and children.
Knitting Skill Level 6
When your sim hits level 6 of the skill they are going to unlock the ability to craft poufs that your sims can sit on.
Knitting Skill Level 7
When at level 7 you are going to unlock the cutest stuff you can make, including some cute decorations. This includes the cactus, penguin, octopus, and the llama and cactus combo.
Knitting Skill Level 8
When at level 8 your sim is going to be able to craft new onesies for the babies and toddlers in their life which allows you to dress you babies in different clothes for the first time!
Knitting Skill Level 9
When your sim is at level 9 of the skill they are able to craft the sweater/scarf combos that are available for all sims.
Knitting Skill Level 10
When your sim maxes out the skill they unlock the ability to mentor any sim who is knitting. They can also make the children’s toys.
