In step 1 you're using the first 10 strips in your jelly roll, but strips 1 and 2 are identical, same for strips 3 and 4, 5 and 6, etc. so there are only 5 colors represented in these 10 strips. Since you're cutting each strip in half, you wind up with 4 half-strips of each color. After you have cut each strip in half you are making strip sets, where each strip set contains each of the 5 colors. You will have 4 strip sets. You don't have any blocks yet. In step 3 you cut 3 of the 4 strip sets into 2 pieces that are 9.75" wide (you will have fabric left over from each strip set). Since you are using 3 strip sets, this gives you six 9.75" pieces at this point. You cut the 4th strip set into six 2" wide strips. (Again there is fabric left over in the strip set.) You then sew the 2" wide strips into the 9.75" wide strips, giving you 6 blocks from these 10 original strips. Then you do the same for the next 10 strips in the jelly roll, then the next 10, etc. You wind up with 24 blocks. Hope this helps. Here's the pattern -
http://www.marcusfabrics.com/images/...uare_quilt.pdf