In the comments to my prior entry Fibergal mused:
"I wonder what is the green/yellow thing at her waist? It appears as though the yarn is in her pocket."
Good question. I agree that the yarn is in her pocket, as you can see in the enlarged detail above. You can just make out the strand of yarn running from her needles to her bulgy pocket on the left. It looks to me as though the green/yellow thing is the stocking or sleeve she is knitting, rolled up to keep it out of the way as she knits, something we've probably all done at one time or another in our knitting lives.