I decided to give it a whirl and, sure enough, it created a nice visual list of some other blogs I like and added some updates from those blogs to my own site. It's sort of an in-between step bridging simple lists of links and full RSS feeds that dump headlines from other sites into your own.
The tool allows you to link to blogs, Web pages, and feeds from your blog's sidebar, with an optional favicon; sort links alphabetically or by last update time; and import subscriptions from Google Reader (my favorite). Most importantly, Blog List links are visible to search engine crawlers, so your blog's PageRank and reputation flow to those you link to. Very cool.
Google also added the ability to put slideshows into blogs, as well as a subscription link, allowing your readers to easily subscribe to your blog via RSS.
These are some basic changes that go toward making Blogger a more fully realized tool. I still wish I had more control over the size and shape of the elements, though ...