I used the pocket knife method on my Wested Lambskin and liked the results, though I was going for minimal distressing. I went along all the different seams and edges with the knife, just sort of scraping the pigment off until I got the look I wanted. The look was, in my opinion, much more natural than sandpaper.
However, a pocket knife isn't practical for distressing the rest of the jacket- I tried for a while, with little result, to distress a small section of the main body to see if it could be done, and it did little other than taking the shine off nicely. That's where I'm guessing the sandpaper/steel wool came into play with the original Raiders jacket.
Personally, I'm a student of the Michaelson School of Natural Distressing, even though i did want those seams slightly scuffed
M.R.