I use a 1/4" carbide ball burr and a 1/4HP flexshaft to do that. I handle them in stag, just like the photo.
Here is a basic build:
Start with 1/4" steel. I have done most of this type in BG-42 and ATS-34, but carbon steels like O-1 and 108X will work fine.
Shape the blade to its basic profile by forging or grinding. Make it a bit thicker than the desired finished blade. Grind in a convex bevel, leaving the edge about .100 thick. Using a sharpie or Dychem, black out the blade areas that are to knapped (carved in a chip fashion). Start at the edge and make sweeping cuts with the burr, creating a rough serrated edge. Do the edge from both sides. Proceed up the blade toward the spine, overlapping the cuts in a more or less random placement ( avoid neat rows). No need to do it all in one pass. Go back and deepen the "knapps" randomly, to create more variety in the texture.I prefer to flip from side to side as I work, to keep the pattern more even . It will take about an hour to knapp out a 3-5" blade. At this point it will look pretty rough. Take a 1X1/4" medium Cratex wheel ,which you have rounded the edge on, and go over the whole thing again ( I often hit it with a fine toothed ball burr first ,to get the deepest grind marks out. A diamond ball burr does well here ,too.). This will smooth out the grind marks and allow you to adjust the knapps to look more like chips in stone. While using the cratex, take the edge down to a scalloped serrated edge. After both sides are done, clean up any other areas on the blade and stress relieve well before HT. After HT and temper, etch the blade briefly, then repeat the cratex grind, taking the edge down to almost sharp. It will make an amazingly sharp edge when those scallops are hollow ground by the small wheel. Once all looks good, etch again to darken the surface .Buff the blade well with black compound. When you are happy with the final surface, clean and etch the blade deeply. Give the edge its final touch up (the edge only) with a cratex wheel and blue if desired , or just give it a quick etch again (I like the dark grey color of the etched steel).
If you used carbon steel the blade will be dark grey or deep blue,depending on your etch/bluing treatment. If you used stainless steel, etching in muriatic acid will create a grey stone like surface. The advantage of the stainless steel is that there is little problem with taking the blade to almost sharp before HT. What goes into the HT foil is pretty much what comes out .
The only photo I could find of one I did is a really ugly one, but you will get the idea.
Stacy