Say you have this data:
ABCABCBACCBBABCC
Dedup system that has block size of 1 can see you really have just three unique blocks, A, B and C.Same data, but dedup with block size of 2:
AB CA BC BA CC BB AB CC
Dedup block size of 2 thinks you have 6 unique blocks: AB, CA, BC, BA, CC and BB.Etc.