Widgets are the core of your blog's layout. Each of them represents a particular element, which when placed together with other elements, like puzzle pieces, forms the big picture, your blog. A widget is a container in which most contents of your reside. This content can vary extremely; it can be a single word or sentence, or it can be a picture; it can be a piece of code for your ad sponsor, or it can be a list of your five most recently published entries; it can be your entire blog header, or it can be the login console. The possibilities are endless.
You will have the option to choose from 4 areas

Your blog comes with a large number of pre-created widgets, designed to offer some of the most useful features you could need in an easy-to-use form. In addition, you can also create custom widgets, in which you can insert any content you wish.
In each of the different blog layout pages under the widgets menu, you will see this image:
Clicking on it will present you with the different widgets available to you in the widget browser. They are grouped together according to their function.
Clicking on any of the widgets will present you with settings, click on the Help tab for a small description of what that widget does. After the widget has been created, it will be appear in the area you chose.

Drag and drop the widget to the particular blog location where you want it to appear, and voila, it's done! The change is saved automatically, with no further interaction required from you. The widget should now be visible on the live blog layout.