I've talked to a lot of digital photographers who are disappointed with basic photo editing tools because they don't always have the intended effect. Take sharpening tools, for example: Somewhat counter intuitively, sharpening doesn't sharpen blurry pictures. But you can increase your subject's apparent sharpness by blurring everything else. This is also an awesome trick for adding a sense of depth to your photos.
Aperture and depth of field
Using a wide aperture (which equates to a low f-number on your camera's aperture dial) is a time honoured trick for blurring the background and forcing the viewer's eye to look at the subject. It also adds a sense of drama to an otherwise nondescript scene. You can get this effect when you take the picture by shooting in Aperture Priority mode and choosing a relatively small f-number.
If you don't remember to do that when you take the picture, though, all is not lost. Consider a photo like this one, in which the foreground and background are all more or less in the focus zone.
We can give the subject more impact by separating it from the background with the application of a deeper depth of field. To do that, open the image file in your favorite photo editing program. I'll use Adobe Photoshop Elements to describe the specific steps, but this is easy to do in any program that supports multiple layers.
Blurring your photo with layers
In the Layer menu, choose Duplicate Layer, and then click OK. This command does exactly what it sounds like: It copies the photo on top of itself as a second layer. You can see that in the Layer Palette on the right side of the screen.
Now that we have two identical copies of the photo open, let's add some blur to the top layer. Make sure the top layer is selected in the Layer Palette, it's probably called "Background copy."
In the Filter menu, choose Blur, Gaussian Blur. In the Gaussian Blur dialog box, you can choose the intensity of the blur by varying the radius value. For my photo, a radius of about 4 should be about right (though it will vary depending upon the resolution of the photo, so you might need to experiment). Click OK. At this point, you'll notice that the entire photo is blurry, foreground and background alike. Fret not - we'll fix that in a moment.
But first, is the background too blurry? You can click Undo and try again with a different radius, or you can take advantage of the fact that you applied it to a layer and fix it using the Layer Palette instead. Just click the Opacity drop-down menu and drag the slider to reduce the intensity of the effect.
When you're happy with the amount of blur, it's time to move on.
Erasing the blur
We're ready to remove the blur from your subject in the top layer. Choose the Eraser tool (16th from the top of the toolbar on the left of the screen). You'll also want to be sure the eraser is the right size and shape for the job. In the Tool Options palette at the top of the screen, choose Brush from the mode menu, this will let you choose a brush with soft edges. In the brush drop-down choose a soft round shape, and make sure that it is no bigger than any sections you need to erase. If your subject is a person, for example, the width of an arm is a good width for the brush.
Now click on your subject and use careful brush strokes to erase the blur effect. Make sure that the edge of the brush stays a few pixels away from the edge of the subject as you paint, and you'll see the soft feathering effect of the brush disguise the transition between the foreground and background for a natural blurring effect. It'll feel almost magnetic, like the brush is pushing the blurry pixels out of the way. Give it a shot and you'll see, it's pretty easy with practice. Here's what my original photo looks like after applying the effect.