Once the area is selected, go to "Filter | Blur | Gaussian Blur" from the menu bar.
In the Gaussian Blur window, adjust the Radius slider till your background is blurred enough. I selected the Radius as 10.1 pixels.
If your subject has any sharp edges at the part that touches the background, you can smoothen it using the Blur tool.
The image below is what the end result looked like. No more distracting backgrounds!
Good .. one .. nice that. tech2 has done this 
