Glow tutorial for Photoshop 7
How to get a slightly glowing, dreamy effect on an icon in Photoshop7
I hope that this explains things well enough. Feel free to direct questions to the comments section, and I'll do what I can to answer them. This is essentially explaining step by step how I make icons with that blurred/glowed effect. Hopefully it'll help someone.
I'm going to make an icon from this image of Kiera Knightly as Elizabeth from Pirates of the Caribbean, which I got from this site.

The image is 600x400 to start, so clearly, it needs to be cropped. I cropped it to this:

which is 300x300. From the Image menu, I chose Image Size, then set it to 100x100. (If you make sure that you have "constrain proportions" checked, which you should always have checked anyhow, you only need to set the width at 100, and the height will follow automatically.)
You now have this:

Now you're going to need to adjust the levels, colour balance, and contrast/lightness settings. You can either do this through the Image/Adjustments/Auto (levels, colour balance, contrast,) but doing that on this image washes it out and removes a lot of the yellow glow that's softening the image, so I'm going to do it manually.
I went to Image/Adjustments/Levels, and played with them until I liked them. Raising the bottom arrow (increasing the first number) makes the shadows darker, the middle arrow (or box) is the midtones, and the top arrow (final box) is the highlight. I ended up setting these to 7, 1.20, and 250, which I felt clarified the image and made it a little more visually pleasing. It resulted in this:

Next you need to adjust the colour balance and the contrast. The colours are a matter of personal preference. I wanted to add a slight reddish tint to this, so I upped the blue, magenta, and red channels a little bit. When I'm making an icon like this, I almost always take the brightness down a little, and up the contrast by roughly double what I decreased the brighness. In this case, I took the brightness down five, upped the contrast ten.

Now that the image is adjusted, you get to start to play with things. Under the layer menu, select Duplicate Layer. Set the opacity of the duplicate layer to about 50% to start with. This may be changed later, but for now, 50% allows you to get an idea of what things will look like without having to tamper too much with the settings to see.
After making sure that the duplicate layer is selected, go to the Image menu again, and select Adjustments/Levels. Using the top arrow slider, increase the amount of highlight until you have the amount of glow that you want. Remember, though, that a little bit of glow can go a long way. Too much can make the image difficult to see, so use it in moderation. Go back to the layer options, and play with the blend mode until you have a level that you like - For this example, I used Soft Light, though I often use Luminosity, Colour, Hue, or even Normal. (I realise that Screen is a commonly used option, but I dislike this as I feel that it sometimes gives the darker areas of the image a greyish cast that detracts from the overall effect. This is, however, personal preferance.) You may need to go back and repeat the Level adjustments if you select a blend mode that makes it fade, or if you think that it needs more of a glow once the blend has been
adjusted. Keep in mind, though, that when you blur the image in a little bit, the level of the glow is going to increase drastically, since you're going to duplicate the layer. It's easier to add more glow later than it is to take it away.
To this point, this is what the icon looks like:

If you feel that you're not reaching the amount of glow that you need, you have a few options. The first of these is to play with the blend setting and the opacity of the layer. Changing the blend is probably the easiest way to get more glow. The second option is to go into the Image menu, then to Adjustments/Variations. By selecting highlights and deselecting Show Clipping, you can click on the "Lighter" image several times, and it will lighten the highlights of the image further. The third method is to go to Filter/Distort/Diffuse Glow. By setting the graininess to 0, you can play with the other two settings to cast a white glow effect that will radiate from the palest parts of the image. (Since you've already added some highlights, the cast will be over that area.) I find this to be the most difficult method, though I know some people who use it successfully all the time. I applied the Lighter variation once to the image, wanting it just a little lighter than what I was able to attain using the levels.

When I have the glow effect the way that I want it, I save the PSD file, (in case I\change my mind and need to alter things later,) and then merge the layers. Once again, you're going to duplicate the background layer. I set this layer to an opacity of 50% and left the blend mode as normal. Making sure that the duplicate layer is still selected, go to Filter/Blur/Gaussian Blur. On an icon, you can probably use a blur radius of anything from .1 to about 5 without osbcuring your image. For this icon, I set it to four, though usually I end up using between two and three.

Now all you have to do is add text if you want, and you're done.
Final image:

(The fonts used are Edge and Scrap Cursive, and the text is from Duran Duran's Come Undone.)
I realise that this sounds like there's a lot of guesswork involved, with the glow getting stronger when you duplicate the layer to blur it and all that, but really, once you've done it once or twice, you start to get a feel for how it's going to look at the end. The next thing you know, you can do the whole effect in less than five minutes.
I hope that this explains things well enough. Feel free to direct questions to the comments section, and I'll do what I can to answer them. This is essentially explaining step by step how I make icons with that blurred/glowed effect. Hopefully it'll help someone.
I'm going to make an icon from this image of Kiera Knightly as Elizabeth from Pirates of the Caribbean, which I got from this site.
The image is 600x400 to start, so clearly, it needs to be cropped. I cropped it to this:
which is 300x300. From the Image menu, I chose Image Size, then set it to 100x100. (If you make sure that you have "constrain proportions" checked, which you should always have checked anyhow, you only need to set the width at 100, and the height will follow automatically.)
You now have this:
Now you're going to need to adjust the levels, colour balance, and contrast/lightness settings. You can either do this through the Image/Adjustments/Auto (levels, colour balance, contrast,) but doing that on this image washes it out and removes a lot of the yellow glow that's softening the image, so I'm going to do it manually.
I went to Image/Adjustments/Levels, and played with them until I liked them. Raising the bottom arrow (increasing the first number) makes the shadows darker, the middle arrow (or box) is the midtones, and the top arrow (final box) is the highlight. I ended up setting these to 7, 1.20, and 250, which I felt clarified the image and made it a little more visually pleasing. It resulted in this:
Next you need to adjust the colour balance and the contrast. The colours are a matter of personal preference. I wanted to add a slight reddish tint to this, so I upped the blue, magenta, and red channels a little bit. When I'm making an icon like this, I almost always take the brightness down a little, and up the contrast by roughly double what I decreased the brighness. In this case, I took the brightness down five, upped the contrast ten.
Now that the image is adjusted, you get to start to play with things. Under the layer menu, select Duplicate Layer. Set the opacity of the duplicate layer to about 50% to start with. This may be changed later, but for now, 50% allows you to get an idea of what things will look like without having to tamper too much with the settings to see.
After making sure that the duplicate layer is selected, go to the Image menu again, and select Adjustments/Levels. Using the top arrow slider, increase the amount of highlight until you have the amount of glow that you want. Remember, though, that a little bit of glow can go a long way. Too much can make the image difficult to see, so use it in moderation. Go back to the layer options, and play with the blend mode until you have a level that you like - For this example, I used Soft Light, though I often use Luminosity, Colour, Hue, or even Normal. (I realise that Screen is a commonly used option, but I dislike this as I feel that it sometimes gives the darker areas of the image a greyish cast that detracts from the overall effect. This is, however, personal preferance.) You may need to go back and repeat the Level adjustments if you select a blend mode that makes it fade, or if you think that it needs more of a glow once the blend has been
adjusted. Keep in mind, though, that when you blur the image in a little bit, the level of the glow is going to increase drastically, since you're going to duplicate the layer. It's easier to add more glow later than it is to take it away.
To this point, this is what the icon looks like:
If you feel that you're not reaching the amount of glow that you need, you have a few options. The first of these is to play with the blend setting and the opacity of the layer. Changing the blend is probably the easiest way to get more glow. The second option is to go into the Image menu, then to Adjustments/Variations. By selecting highlights and deselecting Show Clipping, you can click on the "Lighter" image several times, and it will lighten the highlights of the image further. The third method is to go to Filter/Distort/Diffuse Glow. By setting the graininess to 0, you can play with the other two settings to cast a white glow effect that will radiate from the palest parts of the image. (Since you've already added some highlights, the cast will be over that area.) I find this to be the most difficult method, though I know some people who use it successfully all the time. I applied the Lighter variation once to the image, wanting it just a little lighter than what I was able to attain using the levels.
When I have the glow effect the way that I want it, I save the PSD file, (in case I\change my mind and need to alter things later,) and then merge the layers. Once again, you're going to duplicate the background layer. I set this layer to an opacity of 50% and left the blend mode as normal. Making sure that the duplicate layer is still selected, go to Filter/Blur/Gaussian Blur. On an icon, you can probably use a blur radius of anything from .1 to about 5 without osbcuring your image. For this icon, I set it to four, though usually I end up using between two and three.
Now all you have to do is add text if you want, and you're done.
Final image:
(The fonts used are Edge and Scrap Cursive, and the text is from Duran Duran's Come Undone.)
I realise that this sounds like there's a lot of guesswork involved, with the glow getting stronger when you duplicate the layer to blur it and all that, but really, once you've done it once or twice, you start to get a feel for how it's going to look at the end. The next thing you know, you can do the whole effect in less than five minutes.
