You have to go onto thier profile page when adding them by clicking thier photo or name, then you click the blue bubble and go into the previous conversation you had with them. Then you will be able to select the unblock option from inside the chat dialogue box. Peace.
Just go to the left pane of skype, you will see your blocked friend in there. Do a secondary click on its name to see the various options you get, and select unblock. I had the same issue and solved it.
Look in your history, it should say the name of your contact and then "blocked contact."
Click that, and your contact should show up on the left in recent. right click and select unblock.
If you have deleted the conversation or are having trouble, the easiest way (this is faster even if you have the conversation) is to go to contacts, add new contact, and then search the person you blocked. Click send frend request and it will say you must inblock them first and then click unblock. This is super easy and I fifured it out myself. Have fun.