Blocking a contact won't remove them from your contacts list, nor will it remove you from the list on the contact's phone. To delete a contact, you must delete the contact from your phone's address book.
If you're concerned whether a blocked contact will know if you're blocking them, please read this article.
To unblock a contact:
Tap Settings > Account > Privacy > Blocked.
Swipe left on the contact's name.
Alternatively, tap Edit > the red minus sign icon.
Here are a couple of alternative options for unblocking a contact:
Open the chat with the contact, then tap the contact's name > Unblock Contact.
Swipe left the chat with the contact in your Chats tab, then tap More > Contact Info > Unblock Contact.
Note: If you unblock a contact, you won't receive any messages, calls and status updates the contact sent you during the time they were blocked.