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GAUSSIAN BLUR

(1) You want to make sure your layer palette is out. Press F8 for it to pop up if it isn't out.
(2) Now duplicate the layer that the image is on by right clicking on that layer and clicking "Duplicate"
(3) Now, making sure you're on the duplicated image, go to Adjust > Blur> Gaussian Blur.

(view screenshot)

(4) You can set the radius to whatever you'd like, but I set it to 2.65 for this tutorial. Press OK when you're done.
(5) Now go back to your layer palette and set the duplicated image to OVERLAY.

(view screenshot)

(6) After that, you can add coloring or whatever, but you're finished with Gaussian Blur.