Gather source images.
After opening the image you provided, I noted that it was a low resolution image (282x500); so I first used the reverse-image search feature from
http://images.google.com to find a higher quality version of your image.
I was able to find a copy of the same background image which was already properly sized for the iPhone 5 (640x1136).
I also used Google Images to search for an Apple logo that I could use as a selection template.
Create the iPhone background.
Note: I am using Photoshop Elements but other graphics programs will involve similar steps.
Open the background image to be edited.
[url=http://i.imgur.com/4I04Ll.png]Image[/URL]
Create a duplicate layer to be used as the "frosted glass".
[url=http://i.imgur.com/TFZ8ul.png]Image[/URL]
You should now have two layers as shown below. Ensure that the "Background copy" layer is highlighted.
[url=http://i.imgur.com/IC9OAl.png]Image[/URL]
Apply a Gausian Blur to simulate the distortion caused by looking through the frosted glass.
[url=http://i.imgur.com/NEnoul.png]Image[/URL]
Adjust the Gausian Blur Radius setting until you achieve the desired effect.
[url=http://i.imgur.com/zzATRl.png]Image[/URL]
The "Background copy" image should now be appropriately fuzzy.
[url=http://i.imgur.com/VrWOpl.png]Image[/URL]
Create a new layer.
[url=http://i.imgur.com/VcHgJl.png]Image[/URL]
Use the paint bucket tool to fill the new layer with white color.
[url=http://i.imgur.com/Qt6g1l.png]Image[/URL]
just so...
[url=http://i.imgur.com/9DoZDl.png]Image[/URL]
Adjust the opacity of the white layer to around 30%. This will help simulate the hazy white color of the frosted glass.
[url=http://i.imgur.com/3gORSl.png]Image[/URL]
Combine the white layer (Layer 1) with the blurry layer (Background copy) by choosing the "Merge Down" option under the Layer menu.
[url=http://i.imgur.com/mVDC0l.png]Image[/URL]