Knights where really the glue of Fuedalism, asking their significance to it is like asking what significance do priests have to the Catholic Church.

All lords, barons, dukes, etc where Knights, although not all Knights where lords, or dukes, or counts etc.

A knight owed military service to a higher up lord in return for land. Knights who had no land became mercenaries. While not serving in the army they would govern their land how they saw fit, and depending on their station they could be simply a lowly lord of a minor village, or a high and mighty rank like the Duke of Normandy with many castles fiefs lands and with his own knights serving him.