In my below ground basement, the block was insulated on the outside with 1" of (I guess) styrofoam. They coated the outside of the block with the black waterproofing stuff, let it dry, then put up the insulation and sealed it on the outside with plastic and another coat of the black waterproofing stuff. They made sure of good drainage like Jay J says before backfilling. Well the basement stays warm in the winter even when its below zero outside. I really like how the previous owner insulated when building.
I sealed the block and painted white for semi-finished basement. If I choose to fully finish the basement, I will insulate the inside and use a vapor barrier as well.