A completely new scripting system, based on Lua "modules," has been implemented for Knights. The Lua files completely replace the old "txt" files and are considerably more flexible, allowing many different kinds of mods to be created.
Several players have already made mods, adding features such as spiders, living armors, and a new wand type. More mods are in production as we speak. This is an exciting time for Knights development!
To see the latest activity, check out the Knights forum.
If you're interested in making mods, the best thing to do is probably to download the game and have a look through the Lua files in the knights_data directory. You can also take a look at the Knights Lua documentation. Finally, feel free to post any questions or comments you may have on the Knights forum.
Happy modding :)