Miniature Effect with a Lens Blur

When you are satisfied, select the RGB channel to activate the
background layer with your image on it, and then find the lens blur
filter. (Filter>Blur>Lens Blur) Any blur will work to
some
extent, but the lens blur filter is designed to mimic the optics of a
camera, and is perfect for our optical illusion. 
All I worry about is the depth map and iris radius settings.

Lens Blur:Depth Map

The depth map should be set to the gradient filled alpha channel you
created before (Alpha 1). Otherwise everything will be blurry. If you
did a perfect job you can leave the focal distance setting to zero.
Play with it a little to extend the effect, even inverting it as you
increase the setting. I used 10 in this example to better include the
bus and gas station.

Lens Blur:Iris

The iris radius controls
the amount of
blur, like changing the f-stop on your camera. This is totally a
personal call. I like settings in the 20–60 range for out of
focus, yet recognizable results. The other settings in the Iris section
change the shape of the effect. I haven’t found them to be of
much use here.

Lens Blur:Other Controls

The specular highlights can
be used to brighten whites, even creating lens flare effects if you
lower the threshold. I bumped the brightness up to 30, to increase the
“plastic under fluorescent lights” effect. The
noise
section simulates film grain, and ruins the effect in my opinion. Use
sparingly, if appropriate. When you like what you see click OK. You can
now make the alpha channel not visible (or even delete it if you
choose) and review your results.

4. Crop to Finish

In this example I found I liked a subsection best. Here is the
selection of the final crop.

I was able to turn a rather dull day into a fun shooting experience,
and generated several pictures of our model town:

For a change of scenery, here is a snap of Chaco Canyon, in
New Mexico. The walls look like they are made of styrofoam.

Resources:

You can go here
for information, mostly
optical tilt-shift, and lots of inspiring galleries.

Flickr is also a good source for inspiration There is a pool for optical images,
plus one for us fakers

Bittergirls
is a digital miniature phenomenon.They have lots of high
quality fake miniature images of varied subjects in their photoblog.