Stitch n' bitch is a grassroots phenomenon. It's social knitting (and crocheting) centered around the small group. Hundreds if not thousands of these groups get together weekly around the country to have a cup of coffee, chat, and get creative. The term reclaims the image of knitting from quiet old ladies in dusty parlors.
The origin of the term is not precisely clear, but there are at least two known references to "Stitch and Bitch Club" dating back to 1988 and 1990 and referencing far earlier times. The popularity of the term is recent however, and has been claimed as a trademark of a New York sewing shop named Sew Fast, Sew Easy (SFSW). This company has been sending cease and desist letters to Yahoo! groups and Cafepress shops with the term "STITCH N BITCH" in the title. As per the policies of those two websites, all such requests are immediately honored and groups are shut down.
What claim can SFSW rightfully (and legally) make to the term? Well, in 1998 they first opened their website with the term "Stitch and Bitch Cafe" which later morphed into "Stitch & Bitch Cafe", and finally in early 2003 became "Stitch n' Bitch Cafe". Their main beef seems to be with Debbie Stoller, author of Stitch n' Bitch: The Knitter's Handbook, published September 2003 which went on to become a bestseller. Now it seems pretty clear that neither party invented the phrase, but that Debbie Stoller came a little later and made a lot of money off it while SFSW remains relatively obscure. It looks like a simple case of sour grapes.
Unfortunately by pursuing innocent third parties, SFSW has raised the ire of knitters everywhere. Morally I don't think they have a leg to stand on: they didn't invent the term, and they didn't popularize it. They just trademarked it, and now are attacking small social groups. Legally they may have the right, but why would a company want to alienate their potential customer base?
As of this writing the battle is heating up. See http://freetostitchfreetobitch.org/ for more info.