Duplicate background image and apply lens blur.
Add layer mask to reveal the sharp subject in original image.
To eliminate ghosting around the mask edges,
use the Liquify filter on the blurred image. Using a small brush,
push the halo until it is hidden by the layer mask.


original image by Drew

forum thread link http://forums.dpreview.com/forums/read.asp?forum=1006&message=16631273