The knockback enchantment is mostly applied to the swords. It increases the knockback distance of the sword, it will launch the entity further back than it normally does when struck by a regular sword. This is a good enchantment to keep hostile mobs at a safe distance from yourself.
A Knockback II enchanted book (via screenshot)
Swords are one of the most used weapons in Minecraft, as it allows the player to deal massive amounts of damage to mobs at close range while also pushing them away. What knockback does is just increase the distance the mob is launched by quite a bit.
This can be used in a variety of ways as offensively you could push mobs off of cliffs or into pools of lava or defensively to keep them at bay. However, there are some mobs that are resistant to its effects like squids, wardens, and iron golems (unaffected by knockback from normal attack but the knockback enchantment does affect them).
The first image shows the distance travelled by the creeper with knockback enchantment and the second one without (via screenshot)
The knockback enchantment can be applied to any sword with the help of an enchantment table and by spending experience points and using Lapiz Lazuli. You can increase the chances of receiving a higher power level of knockback by placing bookshelves around the enchantment table. Other ways include fishing, trading with villagers, looting chests, and using an anvil to apply an enchanted book with knockback on it.
The knockback enchantment is a great enchantment you should add to your sword to keep mobs such as creepers, spiders, etc. at a distance. Its increased pushback allows you to use it creatively in both defensive and offensive manners.
A. Pickaxes and sticks are some tools that can be enchanted with knockback.
A. The highest level of knockback is II (2)
A. No, not all tools can be enchanted with knockback.