Here's a little photo tutorial I put together on how I do the blanket stitch. I'm not sure this is the correct way of doing it... this is how I do it although I must say I don't always get it right. I guess I'll just have to keep practicing 
The most difficult bits are the corners and I tried to illustrate the different steps I usually follow. Have a look here and here. I've also included a little text below the photos which I hope will help you get started.
The blanket stitch is used either as a decorative stitch or to help prevent the fraying of fabric. You can also use this stitch to create buttonholes but in this case you'll have to do the stitches very close together.
Hope you like this tutorial.
The next one will be on cross stitching.
