What would you mean by 'Blend', anyways?
Anyways, the best and simplest way is to use the 'Feather' component. Select the 'rectangular marquee' tool, and put in.. say... '40 px' into the 'Feather' box at the top. Now draw a rectangle around the picture you want to paste onto a background, click copy, and then paste it on the new image. The edges will fade to the background.