I have a very limited budget. I have $350 [USD]. If I buy a used DSLR Camera and it doesn't work, it would be a huge loss. If I buy a compact digital camera, would I be able to do DSLR things like blur the background and focus on the subject. Which cameras do you suggest?
I've got everything here, thanks to all of the mates who answered. Making this discussion not longer, I'll have 2 things remaining to ask all of you.
Above seems to be fit in my budget, if there are any better than your suggested let me know.
Thanks once again.
The effect you're asking about is "depth of field." You should read more about it as there are far more detailed answers around here, but briefly: depth of field is effectively controlled by the focal length and aperture of your lens, and the distance to the subject and the distance of the subject from the background. Since P&S cameras typically have much wider (smaller number) focal lengths and much smaller (larger number) apertures than DSLR lenses, it can be difficult to get the effect you're looking for with a P&S. However, if you can get very close to your subject (and zoom in as much as possible) and keep the subject far away from the background, you can still isolate the subject with a P&S.
Here's an example taken with my SX10, of a small (let's say four inches high) object, taken at max zoom (100mm focal length; 560mm 35mm-equivalent), with the background trees maybe 40 feet away: pretty good bokeh, if I do say so myself.
So it is possible to get the effect you want with a P&S, it's just tougher: and that's what you'll find by stepping up to bigger cameras with bigger sensors: each step up will typically make your end goals easier to achieve.
Picking the right camera with the right features at the right price point... I'm not sure I can help you there. You'll have to research the alternatives and make your own decisions.
For around $340 you could pick up a Canon S95 that is a very capable camera, but still fits in your pocket and can do things similar to a DSLR(debatable).
This is a very opinionated answer, but I believe this camera is a great way to start with photography, and learn what areas limit your artistic vision - then allow you to make a better choice when purchasing a DSLR. This could be said with nearly every camera. You just need to pick it up, and use it enough to find the limits.
This camera in particular is very full featured, and will give you excellent shots in most conditions while still giving you full manual control of things like aperture, shutter speed, and ISO.
If you really are serious about learning photography, just pick up any used DSLR, a used Canon 20D comes to mind, it would fit your budget, and probably allow you to pick up a 50mm f/1.8 and still stay within budget. For a beginner you don't want to worry about the equipment so much as just putting in the time and learning.