Knights and barons were two different levels of medieval society. Both were higher than "regular" people (merchants, farmers, et al), but there was a definite order among the knights and nobles, too. Knights were the "entrance class" to eventual nobility, if that makes sense.
Barons were a bit higher in the nobility range. They had been given lands (and the people who farmed them) by the king, usually as a reward for helping him in some way (usually in battle).
The hierarchy went on up from there. You can see this hierarchy at the right of this second webpage I've linked.
1) Henry II was successful in bringing order and stability. To avoid civil wars, he needed to reduce the power of the barons and wanted professional soldiers (mercenaries) to do this. Mercenaries were men who "rented themselves out" to other kings (often in different countries) to fight in place of them. Mercenaries had no loyalty to anyone else in the country except that king who was paying them.
2) Many knights did not want to leave their farms for long military campaigns, so they were happy to pay a tax called scutage instead of giving military service themselves.
3) Henry II sent out judges who gave 'royal justice' as they travelled round the country.
4)This system of law became known as Common Law since it was used everywhere by travelling judges. This was based on custom, comparisons of previous cases, and previous decisions.
5) This mixture of experience and custom is the basis of law in England even today.
6) He also set up rules for the purpose of controlling the clergy, which became known as the Constitutions of Clarendon (1164). According to them the king claimed authority in choosing the bishops.
7) Furthermore, clergymen who committed serious crimes were to be tried by a civil court, as well as an ecclesiastical one.
All these are right, and it's important to remember that what are being described are situations and practices that were relatively new to the English people ... that is, Henry II was changing things from how his predecessors handled the country.