How are people managing to unblock someone on snapchat?

If they're not in that Blocked list at all, then you never blocked them. Either you just removed them as a friend, in which case search and add them back, or they've blocked you, and nothing on your side fixes that.

profile icon, gear, scroll down to Blocked — everyone's in there with an x next to the name. it doesn't restore the friendship though, you'll have to add them again.