The mortar joints between the concrete blocks will crack first, because the joints are the weakest part of the foundation wall. Soil movement, most often caused by swelling and contraction due to moisture fluctuations, creates pressure on the blocks, which eventually results in cracks and movement.
If the cracks are small and found only in the mortar joints, you can scrape out the loose bits of mortar and apply new mortar. If the cracks are larger, however, or if the wall is bowing inward, you can reinforce it with channel iron or I-beams. These iron supports run from the ceiling joists into holes cut into the concrete floor and reinforced by poured concrete. Consult an engineer before installing interior or exterior structural wall reinforcement.
If your basement is taking on a lot of water, or if the blocks are bowing outward, which is less common, you’ll have to excavate the soil from around the block wall to repair the problem. You could remove a section of blocks, if the problem is limited to a small area, and re-set the blocks, or you could install concrete supports on the outside. These exterior supports run from the footer beneath the block wall to the top of the foundation and feature poured concrete or steel reinforcement. One or more of these supports, called “dead man anchors,” may be necessary.
Sealing the inside or the outside of the block wall will reduce water leaks into the basement, but your best bet is to divert as much ground water as possible away from the foundation. Install guttering, raise the grade of your yard next to the foundation so water will run away from the house, and remove foundation plantings that require frequent watering.