[Magnum]

OK, here's what you want to do:
1. Take the part of the picture you want to appear completely and select it. If you want all of a square image or something like that, select just within the borders of the picture. Use any of the selection/lasso tools that you need for what you want.
2. Inverse the selection.
3. When the "other" stuff is selected, go into the layers menu and go
Add Layer Mask -> Hide Selection.
4. When you do this, the new layer mask will be selected by default. You can always select it in the layers toolbar. To blend it, go into the filters menu to Gaussian Blur. When you add that, it should blur up the edges.
5. You may have to use the eraser in airbrush mode with a light pressure to clean up the edges.