How do the wallet, private keys and bitcoins relate to each other?

[dirtdevil]

From what I've read, the bitcoins are stored on the network and assigned a private key which is stored in your local wallet. When you want to spend your bitcoins, you use the private key in your wallet to communicate with the bitcoins on the network. If I got it wrong, let me know. But where do the blocks come in? I know 50 bitcoins are stored in random blocks but once the block is solved, does it get destroyed? Do the bitcoins scatter onto many computers so 5 over here, 10 over there etc etc?