To set up your blog, you simply navigate to Pages > Add New > Name it Blog > Select the blog page from the page attributes on the right hand side and save.

If you would like a large banner image at the top of the page behind the title you simply set a featured image for this page.

The Blog page has an optional Flexible widget area that allows you to display featured categories, posts, pages or a video at the top.  Learn more about that here.

Flexible widget areas will adjust based on how many widgets are added to the area.  Here is a diagram:

To use the Above Blog Widget Area navigate to Appearance > Widgets > Above Blog Widget Area and drag your desired widgets into this area.

How to use the archive page