I find myself asking that question at least twice a month. Between kitty and Emmaline, we have quite a few knits with little holes in them. Most of the time, I take very fine thread and carefully stitch up the hole. Sometimes, the hole is just too big for a simple darn.
Take this adorable dress, which cost $3 at Old Navy. It's one of E's favorites, but after a curious experiment with kitty claw clippers, it ended up in the mending pile. I contemplated doing fancy stitch work to cover up the darning, but then, the light bulb came on: wonder under and appliques! Brilliant!
Using heart cookie cutters, I traced out three different sized hearts from knit that was left over from a turtleneck I turned into a regular shirt for Emmaline a while ago. I ironed them on in an asymmetrical line and gave them a quick zig zag around the edges.
I think I may take out the machine stitching and do a blanket stitch in navy thread, to give the hearts more definition, but for now, a favorite play dress is back in rotation. Hooray!