I opened the image in ACR to make adjustments to exposure and color correction (my taste).
I covered the person's leg with multiple selections of the wicker pasted onto a new layer, merged and cleaned up with the clone stamp. I did all cloning on this layer, such as removing hot spots on the left side. Then I added a layer mask to roughly reveal the edge of the dog.
Then I added a new layer and used the Russell Brown technique to add hair over the transition edge of the masking. I used a hair brush downloaded from the Brown tutorial. I sampled dark and light colors from the dog. (I could have done a better job masking to reveal a couple tufts of the dog's real hair.)
I added two new layers to darken the pupil and change the eye catch light.
forum discussion: http://forums.dpreview.com/forums/read.asp?forum=1006&message=34091207&changemode=1
original image by Joann: