The knife increases the damage your Ranger does in melee by 25%, however, it's best use comes from the Takedown. In the Takedown, the Ranger silently (Although the enemy screams, it makes no noise) kills the enemy, leaving one less liability. In order to preform the Takedown, one must move extremely close behind the enemy. After milling about for a few seconds, the Ranger dispatches the threat. Obviously, low bulk and Stealth are almost a necessity for this, as the enemy may be moving.
The Combat Knife used by LRRP's varied in Vietnam, being that they were so special, but knives were a crucial part of their missions. They are silent, deadly, and they have more than use. The Special Forces in Vietnam loved their knives so much, they made their own, the "Randall Knife".