The Voice Projection function allowed KITT to project his voice in order to be heard more clearly. He could also use it to "throw" his voice in order to distract people into making them think he was somewhere else. ("Knight of the Drones"; "Knight sting")
Voice Projection
Voice Projection was not part of KITT's dashboard. It was a button insert filmed on a soundstage. It's actual placement in KITT is tricky at best. It could have very well been one of the unmarked buttons on the overheard panel.