Target knife throwing, the sport/game seen at your local
renaissance festival or what have you, is lumped together with the throwing of
tomahawks,
shurikens and even
axes at
targets. All of these items tumble vertically on their way to the target and are all thrown in an
overhand gesture. This gets to be an art as you must mentally
calculate how many times the knife must tumble to land blade first and adjust your throwing distance accordingly. The fast and loose formula is that the object will complete one full rotation about every six feet. Therefore, you need to be six, twelve, eighteen, or if you are a real badass, twenty four feet from your target.
This makes this type of throwing all but useless in a combat situation, where people don't stand still long enough for you to hit them with a thrown item, and certainly not long enough to gauge how many tumbles away he is, especially while he's charging at you. The best way to throw a knife, if the situation actually calls for it, is so that it travels blade-first, without spinning, like a dart. This is how the Spetznaz, the Soviet Special forces, learned to throw knives.
This can be done with an overhand throw or an underhand throw. I think underhanded is easier to start with, and it can generate just as much power as the overhand throw. The trick is in how you hold the knife; don't grip it but cradle it, like a tube the knife rests inside. With one smooth, and fast but not snappy, motion, you raise your whole arm out in front of you, but let the knife go at the apex of the movement. It should 'slip' right out of your hand and land tip first. Once you get the grip you can try overhand, and adding power.
Note that this is harder, but not impossible, with knives that have pommels or highly ergonomic grips. Those just require more technique in the release, but generally it is easier with a plain-jane handle with no pommel. The Ka-Bar is a good example, or the wooden handled paring knife in your kitchen sink.
As for the situations which would actually warrant you parting with your blade, rather than simply closing with the target, there are only two major reasons: either the target is within reach of a friendly and you cannot close in time to protect them, or to prevent the target from escaping. If you are in such a situation, aim for exposed flesh around the head or neck. Chances are that the blade won't penetrate too deeply so you have to make it count.
*Note: I only endorse lethal force in terrorist or serial killer type situations where lives are imminently endangered. So however remote the chances of you finding yourself squared off with just a knife against a serial killer or terrorist, for what it's worth, I hope this info helps.