Here is a tutorial to blurring video clips in Windows Movie Maker.
Controlling Reception and Perception
One of the most incredible aspects of video productions is the idea that you can alter the way people see common images. You can alter the image so that they approach the video with suspicion or innocent gullibility depending on framing or effects. A common way to take the events of the video out of the common world order is to add a blur to it. This creates a rift between the audience and the image where they understand that the footage that they are seeing does not adhere to the same rules that they do in their regular life.
This can mean that it is a dream, an indication of a characters altered mental state or memory, or simply that this film is setting its own parameters. This is usually an effect that is added later in post-production so that the filmmakers and editors have more control how it is placed. Windows Movie Maker simplifies the process of blurring the image, similar to how it does with most video effects and transitions.
When you find the clip you want to add the blur to in your Windows Movie Maker project you may want to place it into the Timeline or Storyboard first. Once you do that right click on the specific clip, and select Video Effects. Go ahead and select Blur from the top of the left hand video effect column. Once you have selected it hit the Add button in between the two columns, which will then bring Blur to the right-hand column that lists all the video effects that are on that specific clip.
Now, you can just press OK, and it will be added to the clip. If you want to remove Blur from the clip, you just go back to the Video Effects two column menu, select Blur from the right hand column, and hit the Remove button in the middle to bring it back to the left-hand column. This will remove it from the video clip that you altered.
You may want to be selective as to when you want to add Blur to a clip because Windows Movie Maker does not allow you to alter the intensity. There is just one base amount of blur that can be added, and it is more than a minor defocus. Only add the Windows Movie Maker Blur when you want it to be extremely noticeable to the audience.