This technique was very confusing to me the first time I tried to use it. I stuck with it and it now is one of the techniques I use most often to control where my effects are applied, and how layers interact.
I used Adobe Photoshop CS2 on a PC. This tutorial will very likely apply just as well on a Mac system.
Below, please find the base image that I used for this tutorial. Feel free to copy it so you may follow along:
This is a Gibson Les Paul that I sold to buy my D70s . . . Trust me; I'm a much better photographer than musician!
Open the base image in Photoshop and make sure you have the Levels window open. If you do not, then in the tool bar at the top, go to Window>Layers (or press F7 ?I think) to open it.
In the layers window you'll see a tiny version of your image that says background. Somewhere next to the word "background" right-click and select Duplicate Layer. You can name the layer if you want (a good habit). Click OK.
Notice that the new layer is highlighted in the layers window. That's the activated one. You can click on any layer to activate it. Only the activated layer will change when you apply effects and modifications . . .
In the Tool bar at the top go to Filter>Blur>Gaussian Blur. In the next window I entered a Radius of 3.0 for this demonstration.
The image looks ruined, but not for long . . . Now we have to remove the blur from just the Les Paul body . . . We need to paint a mask for this blur layer that keeps the blur off of the guitar body.