Paint Shop Pro v7 » Silky horses
This effect can be cool sometimes, perhaps if the horse is in a dark forest, or you want the picture to have a fantasy look. I'll use this horse picture:
And this background:
I've pasted the horse on to the background as a new layer. Make sure you remove all the background from the horse like white stuff along the legs and in-between the tail.
The smudge tool 
is the key to the silky effect. So use it with a size around 19 and hardness 0. Use it on the horse in a circular motion. Use small circles or back-and-forth movements and be careful around the places where the color change, like shadows and forms on the horse.
I've used a bigger size on the bigger areas, like the belly and the butt.
I'll darken both the horse and the background a bit so it looks better.
The result looks like this:
