This is a tutorial on how to create a vignette using a layer mask. I'll be using this image.

1. Open the image you'd like to use.
2. Double click on the background layer and it will become a layer.
3. Next, using the marquee tool, either the rectangular or the elliptical (depends on how you want the results to appear. I used an elliptical marqee on the sample above) drag a selection around the part of the image you'd like to mask (or protect). Be sure to leave a good amount of space between the edges of the images and the selection or you'll get a sort of flat line where you don't want one. This takes a little bit of tinkering :)
4. Click the "Add a Mask" icon at the bottom or the layers palette. It looks like a rectangle with a circle inside of it.
   
   
   
   
5. You'll see a black and white version of the selection on the image layer. The white part is protected or masked and the black color will be subject to any filters you apply. You should also notice there is a mask icon next to the visibility icon on that layer. When this icon is not on, the mask is not active.
   
   
   
   
6. This is how the image looks with a mask applied to it.
   
   
7. Create a new layer, fill with white (or any other solid color -- you can always change this later) and drag it to below the image layer.
8. Click on the large mask icon on the image layer. This makes the mask active again. Clicking on the layer alone will not activate the mask and any filters you apply will affect the image.
9. To soften the edges of the mask, blur it a bit by going Filter-->Blur--->Gaussian Blur. Tinker with settings until you get something you like.
   
   
   
   
10. Now you can apply a filter. In the example, I applied Filter-->Pixellate--->Mosaic. You can see a preview of what you're doing in the dialog box. If it looks totally white, use the hand to move it to another part of the image. Adjust settings to what you like.. mine were set to Cell Size 17. Click okay. Neat huh?
    
    
11. You can stop here or add a black frame that can help to define the picture a little more.
12. To add a black frame (you could choose another color if you like) create another layer. Drag it below the image layer. Go Select-->Reselect (if reselect is not available use the marquee to make a selection). Fill the selection with black.
    
    
13. You can soften the edges if you like by applying a blur filter.
    
    
14. Optimize and save.