The feature is now back, it's still enabled by default, but you can disable it from Settings > Formatting by selecting "No" next to "Open images in Lightbox". If you use Blogger's new interface, the setting can be found in the "Post and comments" section. As Google explains, "If Yes is selected, when a reader clicks on an image in a post, it will be displayed in a slideshow-like overlay instead of leaving your page and navigating to the image."
The old interface:
The new interface:
{ via Blogger Buzz. Thanks, Petros. }