You can see the selection outline in the next example. I drew this selection outline using the polygonal lasso tool.
I wanted to edit the area surrounding the image, so I chose Select> Inverse (that's Ctrl+Shift+I under Windows) to reverse which areas were selected and which were not.
I pressed Ctrl+Backspace to fill the selected area with the background color. In this case, the background color was #565656 as shown in the next picture.
I painted inside the selection mask. But before I began, I chose View>Extras (Ctrl+H). This toggled off those infernal marching ants, which enables me to paint without being distracted.
I chose a 19pixel brush in the Brushes palette. With the foreground color set to black, I dragged around the image, then roughed in an outline around the black using white, as shown in the following picture.
I selected and used the smudge tool. I set the tool's strenght value to 80 percent by pressing the 8 key. I dragged from inside the image outward just as many times as required. Finally I got this image:
