Why are flashing LED that way?

maybe simply a crash.
The code looks very strange. Why do you declare a funciton blink inside the for loop?
What does DelayS(1) do? (I guess, waiting 1 second, but how)?

Also, your defines are not symmetrical.
With LEDx_ON, you set the direction to output (which is superfluous after you did it the first time), while LEDx_OFF actually toggles the output. Which isn't what the name indicates.

it should rather be:

#define LED1_INIT P1DIR|=BIT0; // to be used once
#define LED1_ON P1OUT |= BIT0;
#define LED1_OFF P1OUT &=~BIT0;

The way it is in your code halves the blinking frequency and containes redundant/superfluous actions.

While I was playing with my own launchpad i wrote this as a personal note in the comments for later.
And I think it might be usefull for you (or other people)

//If you wish to set a single bit to '1' without changing the state
// of the other bit-registers, you have to perform a "OR"-operation.
//
// You can do this on 2 ways, the short or the long one
//
// P1DIR |= 0x01;             (short)        (0x01 = bin "0000 0001")
// P1DIR = P1DIR | 0x01   (long )
//
// which results in xxxx xxx1 (where x means no state change)

// If you wish to reset a single bit to '0' without changing the state
// of the other bit-registers, you have to perform a "AND"-operation.
//
// P1DIR &= 0xFE              (short) (0xFE = bin "1111 1110")
// P1DIR = P1DIR & 0xFE   (long )
//
// which results in xxxx xxx0 (where x means no state change)

Toggling the LED's whit the XOR is also possible:

P1OUT ^= 0x01; // Toggle P1.0 using exclusive-OR (0x01 = bin 0000 0001)
P1OUT ^= 0x40; // Toggle P1.4 using exclusive-OR (0x40 = bin 0000 1000)

// Logic Table of an 'EXOR' function
//
// Input||Output
// A B || Q
//------||----
// 0 0 || 0
// 0 1 || 1
// 1 0 || 1
// 1 1 || 0

And like Jens-Micheal said, you don't have to calculate the inverse hex of the binary value like i do, just use the bit location like he said.
P1OUT &=~BIT0.

Where the '~' means a NOT instruction.
And BIT0 is 0x0001 (see the header file of you microcontroller)

If you wish to, you can follow al my 'findings' about the launchpad on my blog (it's a school project):
http://project-biosensor.blogspot.com/ (check blink-a-led prog)

So I did as advised Jens and not blinking. Other wise, the delay: I am in the librarywhere their time constants are defined depending on the frequency. Is it just for the needs of different flashing so no need accuracy.

#include "msp430f2012.h"

#include "MyDelay.h" 

#define LED1_INIT P1DIR|=BIT0+BIT6; // to be used once

#define LED1_ON P1OUT |= BIT0;

#define LED1_OFF P1OUT &=~BIT0;

#define LED2_ON P1OUT |= BIT6;

#define LED2_OFF P1OUT &=~BIT6;

void main(void)

{

  WDTCTL = WDTPW + WDTHOLD;                 // Stop watchdog timer

  BCSCTL1 = CALBC1_16MHZ;

  DCOCTL = CALDCO_16MHZ; 

  for (;;)

  {

    void Blink(unsigned ms);

    {

     DelayS(1);

LED1_ON;

DelayS(1);

LED1_OFF;

DelayS(1);

   LED2_ON;

DelayS(1);

LED2_OFF;

   }

  }

}