The name "Knucklebones" is quite literal - because the dice used in this game were originally made from animal bones - more precisely, the "knuckle"bones of a sheep's hind legs which makes it a little more macabre that the main protagonist of the game is a lamb.
Unlike the in-game version however, the IRL variants of the game are usually more focused on dexterity and speed rather than strategy - like tossing and catching the bones in a specific way, for example with the back of the hand. They may even have been used as utensils for divination, tho there are no known clear "rules" for interpreting a throw.
...and yes, "variants" is plural here, because the game seems to have been invented independendly in various places world wide, over the course of thousands of years.
In 2022 for example, archeologists unearthed over 500 individual knucklebones in an excavation of the ancient city of Maresha (Israel), many of which were carefully modified, like "[...] shaved down, polished, perforated, or filled with lead – in order to improve the roll of the dice."^1 Some were also engraved with the names of greek deities, numerals, or other symbols, presumably to be used in some form of divination - or gambling.
And these are far from the oldest ones. The earliest "game set" of knucklebones ever discovered dates back to around 5,000 BCE, with depictions of the game itself being present in various mediums of art across the centuries, like for example in paintings and pottery.
Unlike the "traditional" knucklebones, the modern variants are often made from plastic or metal, with some sets also containing an additional rubber ball. Sometimes the "bones" are tossed, other rulesets require the ball to be bounced and the player picks up bones while the ball is still in the air, then catches the ball again.
The rules of the in-game Knucklebones however were invented by the creator of Cult of the Lamb. While IRL knucklebones have indeed been used for gambling, and some have been engraved with numbers, none of the "ancient" gameplay rules are 1:1 identical to the videogame variant.