The Hallowstone Block is used most commonly in the creation of Hallowed Altars in case if you smashed all the altars with the Demon Hammer and you need to craft a special item.

To craft a Hallowed Altar you will need...

10 Hallowstone Blocks

5 Hallowed Bars

20 Souls of Plight

30 Purification Powder

15 Light Shards

To obtain the Hallowstone Blocks you will need to have a Sky Fortress loaded in your world, you can also get Hallowstone from combining Hallowed Ore and normal Stone.