What are 1-2-3 blocks for?

  They are used for setup of work on machine tools... mostly.
All is answered in this excellent (and freely distributable) explanation:

Uses For 1-2-3 Blocks

(file was supposed to be embedded, but I guess to get that, I have to edit raw HTML and I'm too lazy.
Someone who knows me, ping me offline if the link to the Google doc doesn't work.)

 Also, when shopping for 1-2-3 blocks, worry less about staining and mild corrosion
and worry more about dented edges, not to mention this sort of madness:

 Yeah, uh, please don't do this.  That was a bozo-nono.  This block is ruined now, at least until someone puts it on a surface grinder, and no one is going to do that because this is a mass-produced 1-2-3 block that can be had for less than twenty clams. This piece of scrap steel should be thrown away, but I found it for sale on eBay by some charlatan with no forks to give.  Note serious edge dings which also render it useless.  Kids these days. 

On the plus side, no one was ever going to steal that block once Mr. Fletcher engraved it.  Sheesh.

 You can get excellent used SPI brand (bade in Japan) blocks on eBay, with stains, in beat-up wooden boxes, but in perfectly usable condition, for closing prices on the order of twenty or thirty bucks.

 Cleaning them should be done with a little care and with elbow grease not abrasives; it is best to use a degreaser or solvent to remove "varnish".  Getting rust off should be done with a non-staining rust remover (ie; NOT phosphoric acid) and no abrasive materials at all.  An all-brass wire brush can be used, but not a steel one. Rust pits below the surface don't matter!  On the other hand, dings, engraving, center punch marks etc that deform or project above the surface matter a lot.

The SPI (and some other) blocks are super nice because of the way their holes are drilled, tapped, and counterbored, as mentioned in the document above.  The pair I have are from Enco (RIP), they were made in China, and do not have the holes drilled and counterbored so you can stack them conveniently, or use them as in various ways more easily.  One of these days, I'm going to buy another pair of used SPI blocks off eBay...

 Now, if you own a surface plate, you might be tempted to tape some abrasive paper to it, flood the paper with soapy water, and rub your blocks on that.   I've seen people do it in YouTube videos.  BUT even using a surface plate, and taking care with your pressure, it is my opinion that you will inevitably reduce the flatness of each side, and you will reduce the parallelism of the two sides to each other.  So I would recommend against it.  These things are a kind of gauge that can be used in setup, so if you harm its precision, you've largely negated the point of owning it.

 And watch out for blocks being sold oversized, where they expect you to lap or surface grind them to final dimension / tolerance.