Different vendors sell different types of Blades, so the answers depend on the type of blade system that you get. HP BladeSystem is one popular kind of blade.
is the whole enclosure seen as one big machine and yhr more blades you add the more computing power/resources you get in VMware - or are
the just x number of seperate servers?
Each blade is it's own server. Each blade has it's own CPU, Memory, usually have their own harddrives and remote access, etc. The blades plug into a blade chassis, and the chassis handles power & cooling. Networking tends to be handled on both the blade and the chassis.
Remote access exists on each blade via something like IPMI or iLO ("Integrated Lights Out"), but the chassis tends to have a management interface which organizes the iLO interfaces.
The chassis handles interconnects, the switching layer, and perhaps does some routing. The power cables, network cables, keyboard/video/mouse, etc. are plugged into the chassis.
Think of blades like two dozen small servers inside of a single chassis.
VMWare can be installed just as it can on a traditional rackmount server. ESXi can be installed to the local disks, or can be loaded from a SD card or USB stick (disks are never touched), loaded from the network, etc.