I cannot pass up sharing with you this blog site I found and this first post I came across!  Thank you, Sally, for what you are doing!  I hope everyone who visits our sites, goes and checks out Sally's site regularly - it's awesome!!!!  This may not be proper protocol - but we'll learn along the way.  Here's the link to her site.  Thanks again!  
http://fairydustteaching.blogspot.com/2011/03/developmental-stages-of-block-play.html

Block play is such an important part of the early childhood classroom.  It provides potent opportunities for creativity, imagination, problem solving, and foundational mathematical understandings. It is something that actually has a developmental sequence to it - like writing or drawing.  I love to watch the expansion of block play in the kindergarten.  It becomes such a world in itself!  I find it fascinating that the way children use the blocks can actually tell me something about their developmental growth cognitively.  

Stage 1 Tote and Carry (2 and 3 years old) 
At this stage, one of the first activities is the act of carrying around the blocks or piling them.  It is a full sensory experience as the child experiences the smoothness, the weight, the size and the sounds they make when they drop the blocks.  In this stage, the child is learning about blocks and what blocks can do. 

Stage 2 Building Begins (3 years old) 
At this stage, a child will pile the blocks to make a tower or lay the blocks on the floor in rows, either horizontally or vertically.  There is much repetition in their building.  It is in this stage that the first application of imagination occurs as props such as cars or trucks are used on "roads."

This clip is from the Bowling Green State University Child Development Center home page covering a FEW of the things that children gain from playing in these areas.  It covers all Learning Areas, so check it out!  I've chosen to include only the portion here on Blocks. Click on the link below for the entire article.

Blocks 

• symbolic representation
• patterns
• symmetry
• planning
• balance
• size relations
• trial and error
• problem solving
• interaction of forces
• pre-math concepts-more, less, number, etc.
• visual perception
• hand/eye coordination
• classification
• cooperation
• self-esteem
• completion

In construction activities, children create models that represent their internal vision of an object or event.  This is the concrete way in which children symbolize the world;  and it is a highly creative process.  When children build out of real materials the models that originate in their minds, they must draw on other abilities as well, such as creativity, imagination, aesthetic appreciation, fine and gross motor and perceptual skills, planning, language and often social interaction techniques.  As children construct something out of paper and paste, clay or blocks, they coordinate all aspects of the self.  It is this synthesizing characteristic that explains the importance of construction within our program.

http://www.bgsu.edu/colleges/edhd/cdc/page60405.html