I can not get my head around how the filter work and would really be grateful if someone had an example of how to block an IP address from getting internet access. Don't get me wrong I do good understanding of setting up filters and schedules but blocking internet access only has me baffled.

If you want to block a specific PC browsing then

1 Set up Service objects for HTTP:80 and HTTPS:443
2 Set up Service Group and add above into it
3 Select Rule 2 under Default Filter in Filter Setup
4 Enable Rule (tick Box)
5 Source = Specific the IP address on the PC,
6 Destination - ANY
7 Service, Specify the Group you created,
8 Action Block Immediately
OK

That should do it