While Photoshop's system of using layers makes it incredibly flexible, it can also make a simple job appear hard. (i.e. you often don't need to create additional layers). Fanriffic's method certainly works but it seems over-complex to me. I answered another question, about creating blurred areas in Photoshop, earlier this evening. You might like to take a look at my method, here:
http://www.theanswerbank.co.uk/Technology/Comp uters/Question358314.html
(That question referred to 'motion blur' but you can simply substitute 'gaussian blur' for your situation).
Your fingers seem to have tied themselves in knots when you typed your subsidiary question. (Don't worry - it happens to me all the time!). It's not clear whether you're starting with a black and white photograph (and want to add colour to one object) or whether you're starting with a colour photograph (and want to leave just one part in colour while turning the rest of the photo into black and white). The former is quite tricky (because adding realist colours to a black and white photograph requires some artistic skill and experience). The latter, however, is an absolute doddle:
Assuming that you're starting with a colour photo (and you want to make everything, except one item, black & white), follow the instructions, in my link above, for using the lasso tool, feathering the edges and inverting the selection. Then go to Image > Adjust and click on 'Desaturate'. (Optional: Then go to Image > Adjust > Brightness/Contrast to get the background looking as you'd like). Then right-click and 'Deselect'.
Chris