Segementing and blending is a critical skill which early readers need to master in order to sound out words. I often encourage parents to work on this skill at home as part of their nightly-reading ritual. First off, let me explain what segmenting and blending are.
Segmenting is when words are divided into different phonemes (or letter sounds). For early readers this would consist of 1-letter at a time (either a consonant or a vowel). I would recommend using only words that are spelled with a consonant-vowel-consonant pattern (3 letters). Make sure when choosing a word, that it is spelled phonetically-just the way it sounds (ex: cat, bat, pan, fit).
Blending is when the letter sounds are read together, thus creating a single word. It is important when teaching blending that you make sure the child knows all the letter sounds, then as they begin to connect them together they should make their voice "carry-over" from one letter to the next.
Segmenting and blending should be taught together, eventhough they are separate skills, they rely on one another.
Here are some games to play to work on segmenting and blending: