The blight is pretty much explained within the novellas between levels in the campaign.
The bilght is a microorganism developed similar to those microorganisms that live in the current Earth's ocean beds, around certain vents. The scientists working on the terraforming bug did stuff to microorganisms of that kind so that they would be self-replicating and that they could break up hydrogen and oxygen molecules within the planets crust and release then to the surface. The fact that this bug only lives in environments that contain hydrogen and oxygen (mainly water) is the reason why it can expand.
It pretty much breaks down the elements below the surface and those elements make their way to the surface, carrying the blight with it. That's how it appears on the surface, considering it's something that "lives" underground. It is said that because the scientists used water to kick-start the microbe in their test vents, they made a big mistake, as that's what led to the general release of the microorganism on the whole planet.
Well... that's pretty much what my memory still holds