To implement the collapsing ad units feature, you will need to host a small HTML file on your domain. Your alternate ad URL will reference this file, which will be called if there are no ads available for that particular ad unit.
If your blog is hosted on Blogger, this feature is not for you since Blogger has no option for uploading files that are accessible from your blog domain. Any unused adsense units will appear only as empty, transparent boxes.
Collapsing Adsense Units are such a nice feature but unfortunately, blogspot users cannot use it. How about Blogger users making one combined request to Google Adsense team for providing an alternative solution for implementing collapsing ad units ?