This speed painting of Luke and Obi-won Kenobi from Star Wars is one of the best I have seen. Cgsbgs manages to recreate the star wars figures as if it were a photograph.

First Duplicate the image that you are starting with by dragging it into the new layer icon in the layers palette. With the new layer selected go to filters> blur> surface blur and play with the settings until they are right for your image. Then choose filters> blur> smart blur>. To sharpen up the areas that you don’t want blurred use the eraser tool and reduce the opacity to go over the areas such as the hair, the lips and the eyes.

To see a tutorial on how to create this effect see: colouring a black and white photo.