It is easiest to explain when you see it yourself :):

Open a map (/.wmp).

Press right mouse button (anyware in one the 4 views) than 'Add' than 'Add Model' and select a model to import. And mark the flag 'Shadow' on.

Now go to 'File' (in the upper left corner) than 'Import' and than 'Import from MDL files' and select the same model. <- this is as block

Now start the map and compare the two imported models. Generally, the model imported as a block really blocks (no pun intended) light, while the other model casts a shadow. Futher they differ in how they are effected by lights and the sun.

Ofcourse setting flags or adding shaders/materials and such can add or reduce differences, but that is another story. Also IIRC the Lite-C tutorial explains it too in one of the workshops, most probably better than I do too ;D.