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The factory lists all the specifications, clearances, end-play, etc. of each engine. These don't have to be exact for the engine to run, however, the closer to exact specifications they are, the better the engine will run. Blue Printing is basically certifying that every tolerance within the engine is exactly what the factory specified.
The way I understand what bule printing is: The manufactuer list the engines specs but also list tollerences. and just for an example let's use a piston and the cylinder wall.
The diameter spec for a piston is say 98mm and the cylinder is 100mm, the variance or tollerence could be plus or minus 1 or 97-99mm.
some pistons could be 97, 98, or 99. Blue printing ensures that all of the componets are exactly the same, in this case all eight pistons would be 99mm.
The term blue printing is commonly used with the term balancing which means that while all of the components are the same dimension they all weight exactly the same also.
Yup, exactly as already posted. In addition, when building an engine for max power, the goal is to assemble it so that it has the least internal friction possible. Besides making sure that all tolerances are equal, they often use the loosest allowable tolerances in order to achieve that goal. This probably isn't such a good idea for a street engine that you want to last for many miles but makes a lot of sense for a race engine that gets rebuilt frequently anyway and needs every last hp to win. The term "blue printing" has also applied other components as well and often meant altering them but staying within published specs. When stock classes required "stock" camshafts, smart builders would replace them with ones that were ground to published specs but took advantage of what wasn't published. Lift and total duration were as advertised but opening and closing rates might be much different that the factory cam. If they reduced valve and spring life, no big deal as they were replaced freqently anyway.
Pick up a copy of "Engine Blueprinting" by Rick Voegelin.It has an excellent description of what it is and how badly the term is abused.Technology is changing some things,so the book is a starting point,not an end.(ie: Sequential injection can now "even out" cylinder dimentional differences by use of altering fuel mapping to each individual cylinder, etc.)