I can absolutely understand your confusion, and I think it's important to be asking these questions!

What's happening here is that people are investing in Steemit as a platform with their own money. The quickest way to do it is by using Blocktrades as there's no "official" way to fund your account right now. This means that the only way to invest in Steemit is through a third-party exchange that has set up an account on Steemit to facilitate those trades.

Honestly it makes me a little leery too. I don't know what kind of quality control these crypto exchanges have behind the scenes, as there's literally nothing stopping someone from merely saying they'll transfer the Steem you're buying from them into your account and just keeping it for themselves instead. Of course if one of these exchanges did that, word of that would spread so quickly that the exchange would end up blackballed in a hurry. Still, there's a risk.

Personally I haven't used Blocktrades or anything else to transfer money into Steemit, as I haven't invested any money into it. I have gotten a couple of massive payouts on my posts though, and while I've re-invested a large proportion of those rewards into Steem Power to give myself more voting power, I also transferred some Steem out (into Bitcoin, and then USD) simply for living expenses.