The depth-of-field (DOF) effect dates back to early PS2 games, including Ridge Racer V (2000), The Bouncer (2000), Okage: Shadow King (2001), and Metal Gear Solid 2: Sons of Liberty (2001).
The most widely used depth-of-field effect in recent years is bokeh, meaning "blue" or "haze" in Japanese.
Morrowind Overhaul Mod
The effect isn't always very realistic even though that may have been the purpose originally. In many games DOF is used to blur everything after certain distance from a player character. While it is a valid way to implement the feature, it isn't how eyes actually work always. While distant things may be blurry, eyes are actually able to focus in the distance and have more detailed view even farther away. Morrowind Overhaul mod packet has tried to implement this by blurring distance if player character is viewing something in very close distance but giving more detail in distance if the view isn't actually obscured.