Check out this new iOS app. It's pretty slick. It's free on the app store with in-app purchases. (iOS only as far as I can tell)
Google has a new standalone camera app.
Here are a couple photos I just took with a Samsung Galaxy S III (Intl) - i9300 running Cyanogenmod.
For some reason the app scaled down the "blured" version but here they are untouched straight out of the app for the sake of comparison.
The blur actually looks decent!
Photo with blur feature on:
Photo with blur feature off: