The duplicate layer will appear in the layers palette and it should already be selected. Now go to Filter > Blur Gaussian Blur. Enter a value of 8 pixels for a blur radius. If you're working on a different image you may need to adjust this value up or down depending on the size of the image. Click OK and you should have a very blurry image!
But we're going to change that through the magic of blending modes. At the top of the layers palette you should have a menu with "Normal" as the selected value. This is the blending mode menu. It controls how the current layer blends with the layers below it. Change the value here to "Screen" mode and watch what happens to your image. Already the photo is getting that nice, dreamy effect. If you feel like you've lost too much detail, dial down the opacity of the Soften layer from the opacity slider at the top of the layers palette. I set opacity to 75%, but feel free to experiment here.
