In 3.01 The Magnificent Seven, Ruby appears during the battle with the Seven Deadly Sins, and kills three of the demons with a dagger. Until this point, the only way to get rid of a demon had been exorcism, which sent it back to hell, or with the Colt which killed it.
Bobby states that he has never heard of a blade that could kill demons.
In 3.16 No Rest For The Wicked, Dean steals the knife in the hope of using it against Lilith. However when Sam attacks her with it, she stops him with her powers. Later, after Dean has been killed, Sam is able to withstand her power,and is about to use the knife on her when she vacates the body she is using and escapes.
In 4.22 Lucifer Rising, Castiel uses the knife to cut his arm so he can draw the Angel Banishing Sigil to temporarily get rid of Zachariah. Dean also uses it to kill Ruby, who was revealed to have played Sam, using him and his abilities to kill Lilith, who was the final seal preventing Lucifer from rising once again.