Unfortunately, that particular video is apparently blocked in the USA!
Can you point us to another example of the effect?
I wonder if it's similar to the "Dreamscape" effect I cover in my "Cool Tricks & Hot Tips for Adobe Premiere Elements?"
That's essentially my "Dreamscape" effect from the book -- except that I show you how to blur the edges rather than darken them. But I show you step by step in the book.
Basically, you need to create a Track Matte, using a screen-sized graphic that's white in the middle and gradiating to darker or black around the sides. When you apply the Track Matte effect to your clip and then use this graphic on an upper track to define the Track Matte effect, you'll get exactly what you're looking for. Just like in the book! (I even discuss how to use Track Mattes in the sample chapter posted to this page.)
It's a great little investment if you're looking for step-by-step instructions for creating special effects!
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To produce a blurry edge, make a second copy of the picture only and paste it to a second video track in sync with the original.
Then blurr the second track with the blurr or soften effect
Use your matt graphic as described by the other poster to be white in the middle where you want the original and black where you want the blurred image to show. (like a dissolve between the two clips within each frame.) If you reduge the video gain of the blurred clip it will automatically be darker.
You might have to swap the original and second clip if the middle is blurred.