Blocking sets your knitted garment pieces, smoothes stitches, and plumps up some fibers. Blocking is done with moisture and/or heat, depending largely on the fiber content of the yarn, and your personal preference. How you block also depends on how much stitch definition you want to retain.
There are many methods, and lots of (sometimes conflicting) advice. Blocking should make things look and fit better, not worse. So, if you're not sure how much steam/moisture/pressure to use, use less. Better to under-block than over-block, especially if you're dealing with delicate fibers. Most yarns will not recover from too much heat and pressure.
See all the articles about How to block your knitting on Tricksy Knitter.
Other online instructions for blocking
Blocking Tutorial from the purl bee. Step-by-step instructions with a list of materials, and descriptive photographs.How to be Happy (or, How to Block any Lace Shawl) by Eunny Jang. Lace patterns need to be blocked to show off their intricate patterns.