There is a school of thought that domain knowledge is not a necessity for Project Managers (PM) as that should be left to Operations Managers or other Subject Matter Experts. PMs should be able to keep a tight rein on the timeline and make sure that things run according to schedule.
Well, if the PM had no domain knowledge to offer, then he or she better be able to keep the project under close control in terms of timeline and task execution otherwise there is nothing else for that person to offer! In the course of work, we have probably come across such people who can come across as quite pushy and it can be exasperating if they do not understand what is happening in terms of business knowledge but insists on keeping to a deadline anyway.
In my opinion, a PM should also have domain knowledge as part of our Project Management skills arsenal in order to get some credibility with the stakeholders as we will be able to understand what their discussions are about as well as even contribute to the discussions — as opposed to taking minutes and maintaining a task list to distribute to attendees of the meeting.
Working in the financial services industry, I find that domain knowledge not only makes it easier to grasp quickly any new project requirements, it also makes the job much more interesting as you will be able to put the pieces together and relate to the tasks rather than just blindly executing the project.