So where does the knock suppression of richer mixtures come from?
If the mixture gets ignited by the spark, a flame front spreads out from the spark plug. This burning mixture increases the pressure and temperature in the cylinder. At some time in the process the pressures and temperatures peak. The speed of the flame front is dependent on mixture density and AFR. A richer or leaner AFR than about 12-13 AFR burns slower. A denser mixture burns faster.
So with a turbo under boost the mixture density raises and results in a faster burning mixture. The closer the peak pressure is to TDC, the higher that peak pressure is, resulting in a high knock probability. Also there is less leverage on the crankshaft for the pressure to produce torque, and, therefore, less power.
Richening up the mixture results in a slower burn, moving the pressure peak later where there is more leverage, hence more torque. Also the pressure peak is lower at a later crank angle and the knock probability is reduced. The same effect can be achieved with an optimum power mixture and more ignition retard.
Optimum mix with “later” ignition can produce more power because more energy is released from the combustion of gasoline. Here’s why: When hydrocarbons like gasoline combust, the burn process actually happens in multiple stages. First the gasoline molecules are broken up into hydrogen and carbon. The hydrogen combines with oxygen from the air to form H2O (water) and the carbon molecules form CO. This process happens very fast at the front edge of the flame front. The second stage converts CO to CO2. This process is relatively slow and requires water molecules (from the first stage) for completion. If there is no more oxygen available (most of it consumed in the first stage), the second stage can't happen. But about 2/3 of the energy released from the burning of the carbon is released in the second stage. Therefore a richer mixture releases less energy, lowering peak pressures and temperatures, and produces less power. A secondary side effect is of course also a lowering of knock probability. It's like closing the throttle a little. A typical engine does not knock when running on part throttle because less energy and therefore lower pressures and temperatures are in the cylinder.
This is why running overly-rich mixtures can not only increase fuel consumption, but also cost power.