Block displays will show up on your blocks administration page. Once a block display is created and saved, it can be enabled and positioned in your theme by visiting administer >> site building >> blocks and selecting it from the list. Blocks do not accept arguments from any source; the only way to get arguments to a block is to provide defaults to it, possibly via the PHP Code default setting. A very common scenario is the following:

if (arg(0) == 'node' && is_numeric(arg(1))) {
  return arg(1);
}

If placed into the PHP Code argument default textarea, that will scan the URL to see if it is a standard 'node' URL and if it is, use the node as an argument.