It's much simpler than you think it is. First off, a block is generated by your client locally using whatever transactions it knows and feels like using, as well as a transaction for yourself to claim the block reward plus fees. Your client then attempts to "solve" this block. Only if it is "solved", does whatever was in the block matter to the rest of the network.

Put simply, your client always assumes that it will find a block first until it doesn't. Then it just moves on to the next one.

I hope this makes sense....