I addressed a similar question on StackOverflow last month.
In MultiSite, “blog” is a reference to an individual website. “Site” is a reference to a network of “blogs.” In the future, there’s the likelihood that WordPress will be able to power multiple networks (“site”s) in addition to its current state of multiple “blog”s.
Update
I’ve done some more digging, and discovered a plug-in that easily allows you to split your multi-site installation into a multi-network one: WP Multi Network.
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