Yes, 'dirt' is a regular block, representing soil. Dirt is not used in any crafting recipes, but can be used for farming, tree growth, etc.
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Grass and cobblestone.
Any patch of dirt with no opaque block above it (so only air, leaves etc) will grow grass after a while. If any block is covering it, blocking out the sun, then the block will remain dirt.
Minecraft Skyblock Survival is a custom map for Minecraft. In it, you are on a very small block of dirt with one tree and a chest with supplies in it. You can make a cobblestone generator and use the cobblestone to build and prosper.
In all technicality, the most common block in Minecraft is Air. In terms of solid blocks, it's stone. There might be a few dirt blocks in the way, but digging around mostly yields stone.
You put the dirt in the water, then you make a hoe and use it on the dirt