The blob tool is a relative newcomer to Illustrator. It can be found via the paintbrush tool in the toolbox (beneath it). It uses fills instead of Illustrator brushes which use strokes / paths
You can see the settings for the tool by double clicking the icon and there a number of settings such as keep selected, merge only, fidelity, size, angle and roundless. It has a similar look to the Photoshop brush tool with size and angle etc. There are also a few additional options such as having a fixed size or introduce randomization and variation for the size (as well as angle and roundness) as well as settings for an artpad / pen.
The blob brush can be filled with gradients as well as solid color and also patterns - you can find many different Illustrator Swatches for use with CC and CS6 etc
You can add the stroke in a straight line by holding down the shift key.
As you add the artwork, you will only see the fill being added but you can always add a stroke on completion as well as other effects such as live effects / blurs / additional fills etc via the appearance panel. You can also then add width profiles to the blob brush.
Depending on the selection set for the blob brush tool, you can merge with other paths already created (circles etc) if the color is the same so if the path is black and the blob is black they will be merged (if you use red against green it will not merge). You can control the merging by only merging with selected check set to on. You can also add the strokes and then add additional paths to that via the pathfinder combine / unite. You can also use the subtract to add perhaps add spots and dots to the artwork. You can also add them to symbols (in editing mode) and can find a lot of different symbols on this site for use with the tool such as grids and hearts
One main issue with the tool (whether accurate or smooth), a lot of points can be created unless you add a very basic stroke. You can always use the various tools such as simply etc to remove some of them (personally the best tool is Astute Graphics' VectorScribe plugin)
Sadly the randomization and variation is not with the blob brush single operation but only on re-applying the brush so if you apply one stroke with a variation set to 20pt (and size 10pt) you will get a 30pt or perhaps 15pt etc but not within the actual path itself. The randomization actually works nicely with adding them as single spots (you don't have to add the tool as a long single stroke). It would be great if there was a randomization of color available as well but there is not though you always just change the color via the fill color in the toolbox as you add the artwork. You can also randomize the result by using the color guide tool.
You can use the blob brush strokesto create other presets. Simply add a blob brush and then drag to the symbol panel and then use with the sprayer tool. You can also do the same with the swatches if you wish to create a tile and you can use the tool in the pattern editor. The result can still be added to using the same features of the tool to merge the fill. With the latest CC 2015.1 release of AI, if you add the artwork as a symbol preset then you can also now add it as a dynamic or static item and if added as a dynamic then you can use the artwork as a master and add color and strokes etc to the instances added to the artboard.
Personally, not sure why the blob tool is not on the same toolbox as the erase tool as it is the same tool but inverted. The eraser tool can be added across the applied blob brush stroke and break the art into new individual paths which can then be added to by additional strokes.
Once you have added the blobs (and you can add them as actual spots or in one continious stroke) you can add effects such as tweak or roughen or offset or glow etc and you can then expand the appearance via the object menu.