I'm building a 3'-4' retaining wall in my backyard and I'm in the process of choosing block. One of the blocks I like isn't engineered with any kind of lip or interlocking feature. Is this necessary for a wall that size? Or is this type of block meant more for a freestanding wall or a small garden wall with only 2-4 courses?
The blocks you linked to are more for decorative purposes; one or two courses around flowerbeds or trees. What you're going to need for 3'-4' of retaining wall is something like this:
This is engineered block from http://www.anchorwall.com (I'm not affiliated; it was the first thing that came up when I Googled "Retaining wall blocks"). As you can see, they (and most other providers) can put that "hand-chiseled" look on just about any type of manufactured stone, and color it to your liking, so you should be able to get pretty close.
Understand that a wall like the one in the picture will probably run you between 15 and 20 grand, installed. On top of the blocks and the labor, there is a LOT of prep work that goes into building a wall like this. You have to consider grade on both sides of the finished wall, water drainage (water will sink into the soil and collect behind the wall), as well as build a proper foundation beneath grade (this particular wall represents maybe about 20 TONS of stone, so it needs a very solid base of compacted crushed gravel to prevent shifting and sinking). And yes, you need all of this, because if this wall moves, the soil behind it moves, and then whatever that soil is supporting (like your house) will move.
without a lip you'd want to use concrete adhesive on each row.
check your local code regulations. Typically a wall of a certain height has to be run through an engineer first. In my area I believe the height was 3'. Anything higher I'd have to hire an engineer.
In our case, we had a large amount of earth to retain, but decided it was best to use a tiered approach building two 3' walls with a 8' set back between each.
In either case, go with the largest blocks you can use. The larger the block, the heavier the block, the sturdier the wall, and the better it will hold back whatever is behind it.