I see the status as Blocked, however, I'm able to edit the file. Then the file's status is changed to Modified (Unlocked). Why is this happening?
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It looks like you are using a shared folder for your working files. Normally, the working files should reside on your local drive or on a private server drive and not on a shared server drive. This method provides each user with a "sandbox" in which to perform and test changes. Then, the changes are committed to the Repository.

If you wish to switch to non-shared workfolder on specific workstations (recommended for start), you need to:
1.Check-in all Modified files (or copy to a backup folder).  
2.Open the Projects tab of the Properties dialog box.  
3.Select the project.  
4.Click Workstation.  
5.Specify the desired local work-folder.  
6.Set the Use shared workfolder option in the Advanced tab to None.  
      

If you wish to switch to non-shared workfolder on all workstations, follow the instructions on 'How do I change the work folder of a project on all workstations?' and then click Edit... and set the Use shared work folder option in the Advanced tab to None.

Note: If you choose to use a shared work folder for the project, please read the next FAQ.