If I'm understanding what you are trying to do correctly there are a couple of options. The first would be to set up the comp with two copies of your footage and a mask or track matte for the top copy of the footage. Mosaic would be applied to the masked top copy of your footage.
The second option would be to use one copy of your footage and an adjustment layer with the Mosaic effect applied to a masked adjustment layer. You can also use a track matte on the adjustment layer.
If you are tracking faces there is a third option. You can use AE's face tracker to create a mask that tracks the face. That mask can then be used to restrict the mosaic effect applied to the footage. If you are tracking faces then this could be done with a single layer. Even if you animated the mask by hand (rotoscope) you could do this with only one layer.
Tracking something like a face can give you all the data you need to move a mask or a shape layer and have it follow the movement of the object on the screen. If you are tracking something like a sign or a license plate you can use Corner Pin tracking or Mocha to easily generate a shape layer, corner pin, or mask that will follow the action. If you want precise tracking of something like a person walking through the scene then you can use RotoBrush or rotoscope the footage by hand. This is the slowest method.
Once you have the mask or shape created and following the action you would then use that mask or shape as a track matte for either the adjustment layer or a copy of your footage, then apply the Mosaic effect. All that is left is to adjust the edges of the mask so get the exact look you want for the edges.
I hope this helps. It sounds like you are new to AE and compositing. Let us know if you have no idea what I'm talking about and if possible give us an example of the footage.
To learn about Rotobrush, Track Matte, using masks to limit effects, or anything else you don't understand type a couple of keywords in the Search Help field at the top right corner of AE and in most cases you'll find excellent resources and training.
One last suggestion. Editing and animating masks is pretty straight forward in AE if you select the pencil tool and use the Alt/Option and Ctrl/Cmnd key to modify the tool. Maybe this little tutorial I threw together will help you a bit:
I've been a FCP/Motion guy the past few years, so just getting used to the AE work flow.
Using your bits n bobs of advice I have duplicated the video (one with the mosaic applied) and used the shape layer to manually keyframe where the mosaic should be. The track matte is then applied to the non mosaiced video layer.
The main issue I have is the non standard frame rate of my footage (as low as one FPS), so all the fancy tracking features just wont work. The linear only keyframing in Premiers tracking just looks messy, hence having to use AE to use Hold keyframe interpolation.
I'm loving the power of AE but I must say for simple tasks like this Motion is more efficient. 3 or less steps in the chain and easier to control the shapes. When you have a lot of masks over various frame rates, it does save time.
Thanks for your help though, problem solved.