Blocking prevents the blocked user from viewing your tweets in their timeline.
It does not prevent you from viewing their tweets. >From my testing during the beta period, if you block a twitter id, then your tweets will not appear in any lists that that id subscribes to. However you will still see tweets in any lists that that id is in. Knowing absolutely nothing about the internals of twitter, my guess would be they do not intend to change this otherwise they will end up with a variant on the problem with determining how @replies appear in user timelines. -- -ed costello