I'm so confused as to what an IMEI block does

My iPhone was stolen and I've had it IMEI blocked. O2 tell me repeatedly that this means the iPhone is a brick with no functionality whatsoever.

Even if the thief turned of all networks, wifi, 3G, findmyiPhone.......

The phone just switched off when the block was put in place and would never start.

I asked about the possibility of the stolen phone being immediately taken to a lead lined room with no contact with the outside world but was told that once the bar is in place the iPhone was a useless brick.

How could the iPhone possibly know about a bar in this case?

It doesn't make sense. It's not magic!!

Surely the iPhone needs to know about a bar.

A thief turning off all connectivity and taking the phone to a lead lined room could surely peruse my unlocked iPhone and its information as long as he liked. But O2 have assured me (13 times) that my iPhone is a brick though they have no proof that the iPhone has 'received' the bar.

I'm confused as to how they can guarantee my data security like this.