Digital Camera (p&S not slr) question - narrow focal length.

One of the few really interesting and impressive effects I am able to produce with my non-slr digital camera is when the subject is sharp and in focus, and the background is blurred. (at this point I was going to include a pic of a pigeon on a fence I took years ago, but photobucket seems to be down)

I believe these modes P,S,A,M are fairly standard on mid to high end non-slr digital cameras, so I was hoping someone could explain using these modes to enforce the abovementioned effect. I know it has something to do with making the hole (the apeture?) bigger or smaller and compensating with the shutter speed (the length of time the hole stays open) or vice versa.

P.s. My camera (Nikon coolpix 8800) has an annoying habit of focusing on everything but the object at dead centre. I tried to produce the blurry background effect on a postbox (the old red cylinder ones unique on this side of the pond) but the postbox was blurred and the background sharp and clear!

This is a neat effect you can do by playing with the depth-of-field produced by your camera. You are correct that it has to do with the aperture (i.e. the hole in the camera) settings. In general, depth of field increases the smaller the hole is. That is, if the hole in the camera is smaller, more objects in view will be in focus. To achieve the effect you want, therefore, you want to make the hole as large as possible.

This can be accomplished by putting your camera in A (Aperture priority) mode. This allows you to control the aperture, with your camera doing the appropriate shutter-speed compensations to ensure that the shot is still properly exposed. The number for the aperture is actually inversely proportional to the size of the hole, so to achieve your desired shallow depth-of-field, you want the aperture reading to be as small as possible. So, put your camera in A mode and crank that aperture open as far as it’ll go, and have fun!