Basically, if you have a person in your Blacklist, and the Blacklist is "active", then an inbound call gets handled like this: the phone will not ring or vibrate, although it does make a tiny beep I noticed. The caller gets immediately sent to voicemail. The ringing on their side does not go the normal duration until it times out to voicemail, it goes right away. You do still get the popup advising you that you missed a call, and the led does still flash red.

If you have a contact in your Whitelist, and the Whitelist is "active", then an inbound call is allowed through. Any contact not listed in your Whitelist will get sent to voicemail. You will still have a popup and red led to notify you of your missed call.

If you have a contact in your Addressbook, and Addressbook is "active", any contact listed in your Addressbook will be allowed through. All others, whether they are on your Blacklist or Whitelist, or if they are blocked or unknown (whether you have block Private or block Unknown set or not), will get sent to voicemail. You will still get a popup and led will flash.

To summarize:

Blacklist = DON'T allow numbers on Blacklist. Allow all others through.
Whitelist = DO allow numbers on Whitelist. Don't allow any others through (even those in addressbook).
Addressbook = DO allow numbers in Addressbook. Don't allow any others through (even those on whitelist).

Block Private and Block Unknown can be used in addtion to the three options.