The company has attempted to do away with block functionality for over a year since platform owner Elon Musk discovered that he's one of the most blocked people in the app.

Well, that's speculation, I don't know if that's exactly how it happened. But Musk has repeatedly pointed to "giant block lists" as being a problem for the app, while also noting that blocking, in his view at least, is largely useless, because people can just log in via a different account and read your posts anyway.

Which relates to one aspect of blocking, sure, but it doesn't cover all uses.
So if you've blocked someone, they will still see your updates, which may also be shown to them via the algorithmic "For You" feed. They just won't be able to interact with your posts.

X has further clarified that:

Today, block will become available for users to share and hide harmful or private information about people they have blocked. This update will allow users to see whether such behavior happens.

So the reasoning is that if someone blocks you, then speaks ill of you, and posts private information about you, knowing you can't see it, you'll now be able to view and report such, enhancing privacy.

Which is kind of jilted logic, and overlooks many other use cases of blocking, the basic one being you may simply not want that person to see your posts anymore. That's important with harassers and abusers. Sure, that person can just log in under some other account, but social apps, including X, now have IP identifiers and other tools to stop this type of behavior, by blocking other profiles created from the same person or place.

And many people will not even take this extra step. If someone's annoying you with arguments, and the blood pressure is rising from that, blocking them will usually solve the problem, because they're probably not incredibly invested in stalking and harassing you personally, and won't bother to set up another account for such purpose.

In extreme cases, yes, they may well do that, but I'd be interested to know what percentage of users actually create new accounts for this purpose.

I'm guessing not a heap, and as noted, X has long had systems in place to tackle this either way.  But to clarify, the logic of removing blocking as a function is that:

Blocked users can still see all public posts somehow using a different account
Blocked users are now able to view and report abuse from someone who has blocked them
You can also limit who can see your posts by changing to "Protected Posts", which means that only your followers will see it (you'll receive a request when new people want to follow you, which you can accept or decline).
Look, there is some logic to X's approach, but once again, this reasoning undervalues the many other ways that people use and rely on blocking as a means of protection.
Indeed, by rules of App Store and Google Play Store, all the social apps must offer an option for blocking, and I assume that it had taken such a long time for X to do exactly what it has done because of doing so to ensure that it would comply with that.

However, once again, Elon is not still assured that blocking makes sense so X is continuing with the new policy which definitely would bring about a negative outcome in general.

What's X's gain?

Well overriding blocks means that X will then have more content to show users, and will be able to highlight more posts from people who are commonly blocked. Which likely means that more right-wing users, who are the subject of various mass block lists, will get more exposure in the app, while Elon too will be able to get his posts in front of even more people.

And we know that he's highly interested in as many people seeing his updates as possible.

The motivating factor here does seem to be limiting the impact of block lists, at the very least-it is restricting the reach of the posts of certain users. But it would also not be surprising if Elon personally wanted simply to inflate his own stats.

Either way, it strikes me as a lousy idea, which the app stores should be opposing. Still, thus far, X remains committed to lessening the impact of the blocks.

A side note: shortly, all the people whom you'd been blocking will easily find a way to see your posts again.