Sharon Vaknin at CNET has created a very nice short demo on how to permanently block sites from your Google search.
CNet: How to Permanently Block Sites from Your Google Search
I am very glad Sharon made this video, because I am not sure I would have figured it out otherwise. lol. Note that this only blocks the site for you if you are logged into a Google account. In addition, it is only customized for you. Google will use this as a data point but may or may not use this information to remove sites from search results.
As I have written before, I fully expect link farms to try to use this feature to block good sites from search results. Hopefully, Google can combat such efforts.