What are the key differences between a step drill bit and a knockout punch?
A knockout punch is typically capable of going through thicker metal - at the very least, it will do it faster. A quick search easily finds knock-out punches that can do 10 gauge steel, where most step bits don't seem like they'd do well beyond 16 gauge (though I can't find anything that really says the limit). 

For thin metal though, the step drill bit is probably faster, if for no other reason than the setup/tear-down time of the punch (eg, after you punch the hole, you still have to unscrew the punch). 



Knockout punch:





Step drill: