When using jQuery add ons, you usually have to add the jQuery library too, so you'll have the plug-in (foggy) and jQuery in the resources pane. And, usually, jQuery needs to be loaded first - add jQuery then add your plug-in (jQuery.foggy)
Also, in your script you have "$('.square')" the dot is for a class whereas a "#" is for an id and you did not have a class name assigned to the square.
Blur_test.hype.zip (207.4 KB)
You might like Hype's blur function better, I added a blurred box in the demo