Creating Depth of Field in Paint Shop Pro

Right click on the blurred layer in the layer palette and choose New Mask Layer>Show All and expand the resulting layer Group.

A mask is simply a greyscale layer that adjusts the opacity of the layers in below it in the group depending on lightness of the mask. Black in a mask makes the layer completely transparent while white makes it completely opaque, varying shades of grey allow for degrees of transparency. Because of this we can use this mask to fade in the effect of the blur from zero effect to full blur by simply using a gradient flood fill on the mask. Make the mask layer active and then set your foreground material to gradient.