A simple way to blur a digital image is to apply a "kernel" filter to it.

The kernel is something like:
1   2   1
2   4   2
1   2   1

(and divide the result by 16)

or, for more blurring:
1   2   4   2   1
2   4   8   4   2
4   8   16  8   4
2   4   8   4   2
1   2   4   2   1

(and divide the result by 100)
These are applied pixel by pixel. For example, to apply the first kernel to the pixel at (16, 19), first multiply its value by 4, then add the pixels at (15, 18), (17, 20), (15, 20) and (17, 18). Multiply the pixels at (15, 19), (17, 19), (16, 18) and (16, 20) by 2 and add them in. Then divide the whole thing by 16 (the total of all the numbers in the kernel).

Changing the weightings of the kernel elements can produce effects other than blurring; most notable is sharpening:
0   -1   0
-1   4  -1
0   -1   0


To use these filters on color images, just decompose the image into channels and perform the operations on each channel.