This is a very simple and easy technique that looks very good.
First, choose an image and open it up in PSP8.
I am using this image:
Effects >>> Distortion Effects >>> Pixelate
A window will then pop up. (Shown Below)
You can choose the size of the pixel boxes. I would go with somewhere between 30-50. For this image, I am using 30.
Select OK.
Your image should now look like the one below.
Doesn't look that good now? Just wait. Paste the orignal image over it by going to Edit>>>Paste>>>Paste As New Layer or using the keys Ctrl + L.
Now over on the side there should be a menu that shows your layers. It should have a "Background" and then above it say "Raster 1". (If you don't see the sidebar, go View >>> Palettes >>> Layers, or hit F8)
Double click on "Raster 1" and a window will pop up.
Change the Opacity Level until you can see through the first and start to see the pixelated background. The Opacity Level number should be somewhere between 35-60. I am using 48.
Once you have finished changing the opacity, click OK
Your image now looks complete. Time to merge your layers into one image.
Layers >>> Merge >>> Merge All Layers
Then save your image and viola!
My finished image:
