The term knight refers to any character who does not hold land and does not have an estate.
This is the lowest rank available to player characters and is also the rank that new characters begin at. There is no pressure to ever leave this rank, playing as a knight is perfectly fine, especially for those interested mostly in warfare and less in economy and diplomacy.
As a knight, you are not bound to any location on the map that you need to take care of and are thus flexible in moving wherever your lord and realm need you. As gameplay is simpler and less time-consuming, you can focus entirely on being good at your main responsibility: Warfare.
Knights will often make up the bulk of a realms army, as they can move when and where they are needed, and their absence is less felt. They can be the main strike force, but also fast-moving raiders or anything inbetween.
Without an estate to draw from, knights are dependent on lords to supply them with fresh troops and replenish losses, and on friendly settlements to resupply. Without a good realm infrastructure, a knight could end up with a depleted army and no way to fill it up again. Of course, if that happens it is a good indicator that the realm is going downhill and a better liege needs to be found.
Outside of war, knights often struggle to find much activity, which is the main driving force behind both distractions such as tournaments and new wars. As such, even though the individual knight is low in the hierarchy, when united, the knights of a realm can be a powerful political force.
If there is no war or other duties, you can also explore dungeons.
If your character is ambitious and wants to become more than a knight, the next step up the ladder is not so far away. All you need to do is capture or be given an estate, a settlement to hold as yours. Whether independent, by conquest or as a vassalage, as soon as you own land, you are Playing a lord.