Both a Random Block and a Question set allow you to deliver a specified number of the questions randomly selected from the set in a random order to each student. For instance, you may wish to display 5 randomly selected questions out of a group of 10, so each student receives a different test, at least for that portion of the test. You can use multiple Blocks or Sets within one test.
The difference is where you get the questions and how you edit the block/set.
Random Block
Random Block questions can only be pulled from a Pool. Once you've created the Block, you cannot add more questions to the Block. This is an "older" Blackboard function.
Question Set
Question Set questions can be drawn from a Pool or from an existing Test, and you can search by tag, category, or question title to find them. You can add more questions into the Set after creating it. The Question Set is a "newer" functionality, and generally is equivalent to the Bb Learn function of the same name. Most faculty will find a Question Set works better for them.
You do not need to use a Random Block or a Question Set if you simply want to randomize ALL questions in a test!
Instead you can select the Randomize Questions checkbox on the Test Options page.