Attached Link: http://http://www.cs.mtu.edu/~shene/DigiCam/User-Guide/filter/filter-diffusion.html

There are a number of ways I know how to do this. Ignoring doing it in the computer: 1) Easiest way, get a filter for your lens. Haven't used one in a while, but I liked the look of Cokin's 084 for portraits. The 083 was a bit too subtle for me. Check the above link for a discussion on this type of filter. 2) Black scarf, sandwiched between 2 filter rings. I bought a couple beat up filters at a garage sale that were the right size for my lens. I then removed the glass so I only had a ring. I then stretched some black scarf over one of the filters and screwed the second filter down on top of it to secure the scarf (make sure the scarf is smooth without wrinkles or puckering). Then I cut the excess scarf away. This gives a subtle diffusion (it's great for shooting portraits of women as it softens the skin). 3) Use a special lens. Canon has a really nice 135mm f/2.8 soft focus lens. The combination of the softness of the lens combined with overexposing a bit would get you the effect you want. 4) Another, somewhat more radical look, is using infrared film (if your camera can use it) or if you have digital, your camera may be sensetive to IR. Usefilm.com has a section for Infrared photos. Need to join in order to see the images at a good size. -=>Donald