When you lock onto someone, you can throw throwing knives at them, normally an instant kill, at them without missing. You can also throw them without locking on but have a pretty high chance of missing since there isn't really an aiming system like that. When the enemies are closer to you, you will be able to use the dagger instead of the throwing knives, which can perform all of the special abilities listed above. It is faster, but weaker than the sword.
The throwing stars should only be used on distant enemies, such as archers, and the dagger's main use should only be to fend off other attackers while you try to use the throwing knives. It can be used like the sword, but I do not recommend this due to the lower damage rate of it compared to the sword. You may also accidentally throw a throwing knife at someone while trying to attack your opponent.
Ezio can hold upto 25 Knifes after all the upgrades, and a special attack can be unlocked where you can target upto 3 guards at once and instantly kill them. This is a very effective method for dispatching a large number of guards.