How To Miniaturize a Scene

It's called a tilt-shift effect. It's a favorite device of fine-art photographers and the Flickr crowd. The idea is to keep a narrow band of a picture in sharp focus while blurring everything else. The result: a sprawling photo-scape suddenly looks like a scale model.

To pull it off you need an expensive tilt-shift lens -— or this simple trick with Photoshop or GIMP (multi-platform free/open source image editing software).

1. Import your image into Photoshop/GIMP, then press Q (Photoshop) or Shift-Q (GIMP) to enter Quick Mask mode.
2. Select the Gradient tool and set it to "Reflected Gradient" (Photoshop) or "Bi-linear" (GIMP). Click on the area you want to be in focus and drag the cursor in the direction you want the image to blur.
3. Press Q (Photoshop) or Shift-Q (GIMP) again to complete the mask and exit Quick Mask mode
4. Invert your selection with CTRL+SHIFT+I (Windows/Photoshop)/ SHIFT+COMMAND+I (ie Select>Inverse) (Mac/Photoshop) or simply Ctrl-I (GIMP) once you quit Quick Mask, otherwise you'll blur the section you actually want to keep in focus :)
5. Apply a blur filter from the Filters menu.
6. Marvel at your masterpiece.

Source:
http://howto.wired.com/wiki/Miniaturize_a_Scene