By clicking the 'subscribe' link which takes you to the Subscribe/Subscriptions page (/blogs/skins/_subscriptions.php)

You cannot subscribe to hidden blogs.
By hidden i mean blogs that have this option unchecked; Include in public blog list.

As the _subscriptions.php page just grabs a list of public blogs.

What i believe 'should' happen is their should be a link titled, subscribe to this blog, and manage my subscriptions.

So you can subscribe to a hidden blog if you are viewing it, and so u can still manage your subscriptions.
By manage i mean, view your currently subscribed blogs and then have the ability to unsubscribe to them.

Cheers
-Balupton