I think we need to maintain the distinction between oils-artist's oils, and petroluem-based enamel paints.
Artist's oils lend themselves readily to blending, which is a feature that those who use them prize. And as Scott pointed out, they're not really used for painting toy soldiers, though they are used by many who paint in the connoisseur style, and they are popular in Europe.
Petroleum-based enamels, on the other hand (eg, Testor's little square bottles), aren't really used for blending. But they are handy for painting in traditional toy soldier style, especially the gloss enamels.
I haven't heard of anyone blending acrylics-blending being laying a new color on top of a color that is not quite dry, and mixing the two to produce a transition zone between the two. I imagine you could, but acrylics' shorter drying time almost precludes the technique. Acrylics lend themselves more to building up a color by successive washes-applications of the thinned out color.
Scott raises another good point-drybrushing, to get the effect of different colors side by side, or highlights and lowlights, which is the effect a painter using artist's oils is shooting for with blending. I use drybrushing, too, especially on figures that go with my scale models (eg, a pilot in a P-40) and especially for highlights, and washes for lowlights or shadows.
As an example, I painted the pilot I mentioned by washing the kit part first with soap and warm water. Then I primed him with a fine-grained automotive primer (sounds high-falutin', but it was just WalMart's generic brand). Then I laid in my base colors, from the inside out:
flesh for the face
khaki for the trousers
medium brown for the leather jacket, shoes and flying helmet
yellow for the Mae West
Then highlighting/shading. On the jacket, a slightly lighter shade of brown, almost tan, drybrushing to hit the higher areas of the jacket-tops of folds, for example. Same on the khaki trousers, a slightly lighter color (I used the flesh color). I applied some shadows to the trousers by washing with a wash of artist's oils in turpentine (aka an oil wash). For the rest of his body and his face, an oil wash using burnt siena. Just enough to pick out the detail of the casting.
I also used a matte lacquer between applying the basic colors and the oil washes, to keep the thinner from possibly damaging the layers below, since I was using all petroleum-based paints.
The techniques would be similar for larger figures.
For touching up damaged paint, though, you wouldn't need to go through such an involved process.
If I had used all acrylics, I would have painted in my base colors, maybe using lighter shades, then use all acrylic washes to lay darker colors in the lowlights and gradually build up the shadows.
Hope that doesn't confuse things further, prost!
Brad