"Katie" was the name given by Jack O'Toole to his bowie knife.
When he threatened Xander with it, he told him that he named it Katie, to which Xander replied, "You gave your knife a girl's name? How very serial killer of you." Xander displayed a general fear of Katie, while the girl he was with nonchalantly told Jack it was "cool". Jack later also used it to try to kill Xander, in order to reanimate him as a zombie, and initiate him into their gang of zombies.