Can somebody explain how blockades work to me please. I seem to have a civilian ship (pirate) parked over my capital system that I can not interact with in any way. frustrating.

Blockades happen when combat ships activate the shield icon in the action menu. 

A blockade can only be initiated if the ship in question has at least one weapon module. 

A blockade is denoted by a ring of icons around the system in question.

Blockaded systems will halt the remaining movement for 1 turn of any opposing ship that enters the system. 

Civilian ships such as trade ships and population ships can be intercepted and looted if you attack them once they get stopped. 

Blockades do not automaticly cause an attack, so you must micro manage any systems you are blockading each turn if you hope to disrupt or intercept enemy fleets/civilian ships. Ships are free to leave the system the following turn.

An colonized system under a blockade will begin having its defenses drained each turn. The number of manpower removed per turn appears to be double the active number of command points.

A system under blockade will also recieve penalties to science and dust output, and be unable to collect any luxury or strategic resources until the blockade is broken. 

To break a blockade you must create or move an already active fleet to the system and engage the ships in space combat. If it is a lone pirate ship, identify its armaments and build a ship design that counters it. Then rush production of one or two of those ships. Leave them in  the hanger until you have enough of a force to win and deploy them as a single fleet. 

Good luck! Hope that helps.