There isn't a lot of good information about the picot cast-on floating around the internet, so this is a how-to that I really wanted to write. The basic concept of picot is adding extra stitches for decorative purposes, making a 'bobble'. There are many variations depending on how large you want the decorative part to be. What I describe here is the least obvious picot cast-on, though it will ruffle a bit. I learned how to do it from The Knitters Book of Finishing Techniques.
Start with your trusty slip-knot:
This is your first stitch.
Cast-two more stitches using the cable cast-on.
Now you have a total of three stitches on the left-hand needle. (I don't know why my right-hand needle is in there-finishing up the last cast-on, I guess?)
Knit two stitches.
One stitch left on LH needle, two on RH needle
Bind-off one stitch, like the conventional knit bind-off; slip the first stitch on the over the second stitch on the RH needle using your LH needle, then drop it off of the LH needle:
Place the stitch remaining on your RH needle onto your LH needle by inserting your LH needle through the underside of the stitch:
This is your first picot cast-on stitch. To continue, cast-on one stitch with the cable cast on. Make sure your LH needle is going between the stitches for the cable cast-on, rather than through any loops. Then repeat the procedure starting back at "Knit two stitches." until you have cast-on the amount needed for your piece. It'll look something like this:
And the finished product, on k1p1 ribbing, looks like this:
I was pleasantly surprised! I really like it, and I think it's very conducive to allowing the ribbing to stretch. I'm declaring picot a front-runner for a cast-on with stretch, and am glad to have overcome my prejudices against it.