and it takes a new shape. Say, you place a blue water block, you click "activate" on it, and it transforms into a little rounded cube of water. When you place another blue block next to it, it will "activate" and become a cube of water too, only that since htey're next to eachother they'll connect and form a combined rectangle of water. Same goes for red blocks: place it, "activate" it, and it transforms into a small bubble of lava; place more activated bubbles of lava next to it and it forms a lava stream.

A single block can have different activated forms, too; red blocks can become lava or fire, for example, and blue blocks can become water or ice. The player has to learn "recipes" for the different activations, though; while the player might have plenty of red and blue blocks, they're not useable until he or she can learn how to craft with them. Think of the blocks as like elemental crystals that can be used to create things