Blood Magic
Blood Magic is a slightly different take on the other, more typical schools of magic in Dom 3. Instead of using magic gems to cast spells, blood mages use blood slaves to power the enchantment. Blood magic has the advantage of being able to replicate (to a lesser extent) many of the spell effects of all the other magic schools in a "Jack of All Trades, Master of None" situation. Blood also has some excellent summoning spells.
The major benefit to blood magic however, is your ability to regulate the supply of magical fuel -- in this case, blood slaves. All other schools of magic are dependent on the gems being provided by the magic sites that you have discovered. Blood on the other hand simply requires that you hunt for blood slaves, which can be found in any province. Since your blood slave income is not fixed, you can theoretically control the flow of said slaves through your own actions.
Blood Slaves
Blood slaves are the virginal daughters (and perhaps sons) of the population of your nation. They show up in your strategic display just like other magic gems -- your mages can have them in their inventory, send them to the labs or trade them between themselves just like other gems.
In the tactical (battle) screens however, blood slaves appear as units, standing meekly by the mage or leader that had them in his or her inventory. They will not attack, but they can most definitely be killed in all the regular, messy methods. As blood magic is cast on the battlefield, the blood slaves will be "used up" by the nearby mages casting the spells.
As a general rule, it takes more blood slaves to accomplish a given effect than a comparable spell uses gems. For example, the Nature spell "awaken ivy king" requires 30 nature gems, whereas the the Blood spell "bind arch devil" requires 99 blood slaves. Obviously the ivy king and the arch devil are not exactly equivalent, but the y can be thought of as relatively on par with one another as they are both level-7 spells.
Blood Hunting
Since you are the beloved god-head of your nation and the rightful ruler of all creation, your worshipful people willingly provide their nubile, virginal children to be messily killed for your greater glory. All your representatives have to do is go door-to-door asking for children to be slaughtered, and the villagers smilingly give them up.
Well, maybe it's not quite that easy.
Blood slaves are obtained by setting a leader's orders to "Blood Hunt." In theory, any leader can blood hunt and obtain blood slaves; in practice, it should be done by leaders with levels in blood magic. The number of blood slaves that can be obtained each turn is a function of the leader's level in blood magic, the size of the population int he province and the amount of unrest in the province.
Blood hunting causes unrest, which in turn causes fewer blood slaves (and less money) to be available from that province. Patrolling the province and setting taxes to a lower level will reduce the unrest.
Note also that blood hunting also reduces the population of the province (fewer nubile virgins = fewer new babies = drop in population). This can be counteracted by a high growth scale, or limiting blood hunting to provinces with very high populations.
Blood Sites
There are a negligibly small number of sites that provide blood slaves on a turn-by-turn basis like other other magic gems. Typically, these sites are found in the capitals of the blood nations like Mictlan, but on rare occasions they can be uncovered by the normal site-searching methods.
Blood Sacrifice
Commentary
It is generally considered inefficient to search for sites that provide blood slaves. They are so few that the return on investment is negligibly small.