Photo Blur (free) is a clever app that uses your existing pictures to create nice-looking wallpaper on your iOS device.
The app is simple to use. Select a photo from your library, or take a picture directly from the app using the iPhone's camera. You'll see a slider that lets you determine the amount of blur, and another one to shift the colors. You can also select a pattern to overlay your image. One pattern is provided, and more require an in-app purchase.
The results depend on the photo you seed the app with. I found some of my landscape photos looked great after processing with Photo Blur. You also get the satisfaction of knowing the wallpaper is your creation, not something taken from the web.
Photo Blur for iOS
Of course, I also use some of my own unblurred photos as wallpaper, but the backgrounds can be a bit busy and can make text on the screen hard to read. Photo Blur solves that with a soft image and vibrant colors.
I did just fine using the free version of the app, and did not feel the need to invest further. Photo Blur requires iOS 7 and is optimized for the iPhone 5. It is not a universal app, so the best results will be on iPhones and the iPod touch.
For free, Photo Blur is worth a download, and my wallpaper has been nicely upgraded.