There is no any pre-loaded photo effects in the photo app, but if you want to blur something in your photos or add mosaic effect, the photo app Photo Mosaic can help you.
Photo Mosaic is an easy-to-use photo app developed by Ro Entertainment, and designed for iPhone and iPod touch. The iPhone app features intuitive, minimalistic user interface, well-designed icons. Just tapping the two cute icons on the home page, you can select importing photo from your camera roll or taking a photo directly in the app, while tapping the icon in the lower-left corner will show you all the settings of the photo app. You can use mosaic or pure blur effect to blur your photos in order to emphasize something in your photos, and both Mosaic and Blur also features multiple different effects. When finishing your works, you can also share them with your friends via Email, and the photo app also supports HD photos.
Photo Mosaic with a size of 1.7 MB is compatible with iPhone, iPod touch and iPad running iOS 4.3 or later. The iPhone app is free for a limited time at present. If you’re interested, jump to App Store for more details.