https://bugs.freedesktop.org/show_bug.cgi?id=37490
--- Comment #4 from Fredrik Höglund fredrik@kde.org 2011-05-23 10:22:09 PDT --- Judging by the screenshot this may be a duplicate of bug 33824.
The logout effect in KWin uses automatically generated mipmaps + LOD bias to blur all windows except the dialog in the center of the screenshot.
Does the problem go away if you set ColorTiling to False in your xorg.conf file?