An HTML tag.

The BLOCKQUOTE tag appears first in the HTML 2.0 draft.

(from RFC 1866 Hypertext Markup Language - 2.0 November 1995)>

5.5.4. Block Quote: BLOCKQUOTE

The <BLOCKQUOTE> element contains text quoted from another source.
A typical rendering might be a slight extra left and right indent,
and/or italic font. The BLOCKQUOTE typically provides space above
and below the quote.

Single-font rendition may reflect the quotation style of Internet
mail by putting a vertical line of graphic characters, such as the
greater than symbol (>), in the left margin.

Notice that RFC says that the "typical rendering might be ..." and that "single-font rendition may reflect ...". In RFC-speak, may and might mean "It would be nice if this happened but it is not mandatory for conformance to the RFC". Which means that an RFC 1866 compliant browser may well render BLOCKQUOTE as blinking, bold, red on green monospace font.

The HTML 3 valiant attempt

HTML 3 was a 1994 attempt to extend and improve HTML 2.0. It was never standardized (like HTML+). Quoting from the draft:

The BQ element is used for extended quotations. The tag name has been abbreviated from HTML 2.0's BLOCKQUOTE to the more convenient BQ, and the content model extended to allow the source of the quotation to be credited.

The BQ tag had a an optional CREDIT tag for providing credit for the quotation. It was a good idea, but it did not survive.

HTML 3.2

In HTML 3.2 BLOCKQUOTE remains BLOCKQUOTE, that's to say, it does not change into BQ and it does not get a CREDIT tag. In the words of the spec (this is an official W3C reccomendation:
This is used to enclose block quotations from other works. Both the start and end tags are required. It is often rendered indented ...

SGML lawyers will notice that the BLOCKQUOTE element is defined as: <!ELEMENT BLOCKQUOTE - - %body.content>, which means that a blockquote can contain anything that a BODY element may contain. This, in turn, implies that you can nest BLOCKQUOTEs, and that you can fill them with forms, headers, paragraphs, lists, images.

Again, no hard requirement is made that the rendering of the element be anything special. "It is often rendered indented", but this is not required.

HTML 4.0

actually HTML 4.0.1, but the differences are minimal. In the spec (again, an official W3C reccomendation), BLOCKQUOTE is discussed together with Q (that nobody seems to like much).
These two elements designate quoted text. BLOCKQUOTE is for long quotations (block-level content) and Q is intended for short quotations (inline content) that don't require paragraph breaks.

The spec subsequently enters a fait accompli mode, and mentions the rendering:

Visual user agents generally render BLOCKQUOTE as an indented block.


Note. We recommend that style sheet implementations provide a mechanism for inserting quotation marks before and after a quotation delimited by BLOCKQUOTE in a manner appropriate to the current language context and the degree of nesting of quotations.
However, as some authors have used BLOCKQUOTE merely as a mechanism to indent text, in order to preserve the intention of the authors, user agents should not insert quotation marks in the default style.
The usage of BLOCKQUOTE to indent text is deprecated in favor of style sheets.

So there. Bad authors. The W3C bows before the collective force of millions of web pages. It remains to be noted that BLOCKQUOTE gets, among other things, a cite attribute that should contain the URI (this is not a typo for URL: 'tis different) to the cited document.

My head hurts. What does this mean to me ?

It means that the traditional, accepted and justified method for quoting blocks of text, and for producing indentation is to use BLOCKQUOTE.
It is not the canonical way; matter of fact, there will never be a canonical (in the W3C sense) way of indenting in HTML, because HTML is a markup language, not a stylesheet language. The idea is that HTML concentrates on document structure, not on document appearance: and indentation is definitely appearance.

And of course, anyone will recognize that BLOCKQUOTE is much less ugly than doing unholy things with DL.

My head does not hurt enough

Since you are a sucker for punishment (or an SGML addict), you should read about XHTML and dive into I will anticipate, though, that the XHTML 1.0 spec does not mention BLOCKQUOTE. This means that the W3C has not changed its mind and things stay as they were in HTML 4.0.