Step 1: Duplicate your layer

Duplicate your layer (Layer>Duplicate Layer) so we have the original layer still to work with.

Step 2: Blur

To create the blur go to Filter>Blur Lens Blur. A new window will open where you can adjust various aspects to increase/decrease the blur. We increased the Radius slightly and left everything else alone. Once you're happy hit OK and wait for Photoshop to apply the changes.

Step 3: Remove some of the blur

You'll see your entire photo is now blurred but this can be rectified in a few easy steps. First, you need to create a Layer Mask by clicking the icon which looks like a circle sat in a rectangle on the Lens Blur Layer.

Now go to the Tools Palette and make sure your foreground colour is set to black then select the Gradient Tool or Paint Brush. The Paint Brush can be easier to use when working with portraits or shapes that aren't even but we'll cover both methods in this tutorial.

To use the Gradient Tool simply click in the area you want to be in focus and drag a line out. When you let go of your mouse you'll see the blur has been removed from the area you began drawing your gradient from. If you want to use the Paint Brush simply paint over the areas you don't want the blur to be applied to. If you paint away too much blur simply switch your foreground colour to white to paint the detail back in.

Finished image: