Pattern directions include both flat and in-the-round knitting. The stripes come from self-striping yarn. The ruffles are knit with a contrast yarn.
Self-striping yarn works better when the dress is knitted in the round. It doesn’t show much at the placket, but below the placket the stripes won’t necessarily match up. By switching to working in the round right after the placket, there is no noticeable jog in the stripes. This could be knit flat with a plain or less-obvious stripe or the stripes could be made with two different yarns and then sewn up the back. Another possibility: Knit flat with self-striping yarn and put a decorative trim down the seam. Proper blocking is important to make the ruffled trim lie comfortably at the hem. Either wash and pin to dry or steam using a pressing cloth. I like to use sock yarn or Superwash yarn for doll clothes that might accidentally end up in the wash.