This right here. Nobody is converting the local average distance between streets in their heads into ordinary units of length and then converting. In ordinary conversation, to say "so-and-so is three blocks away" means you'd need to cross three streets to get there.
And just like you have an idea of how big a mile or kilometer is without having to get out a tool to measure it, blocks tend to be pretty consistent within a given town or city, so "a block" has a similar rough intuitive distance.
