This is a very quick example of applying a "dream like" effect to the top and bottom portions of the screen. It uses Construct 2's built-in autorunner demo.
Steps to reproduce:
1. Create a new layer with a parallax of 0,0 and place it above the layer(s) you would like to change. This will effect all layers underneath this "layer mask."
2.) Create/import a new sprite on this new layer or tiled background that fades from white to transparent.
3.) First apply the "Divide" effect to the new layer and the add any other effects you would like after that.
That's really all there is to it. The whiter the area, the more of the effect you'll have and the more transparent the area, the less of the effect you'll have.
I plan on using it to create a tilt-shift effect in a future game, but I can also see this as a way to create patchy fog, fuzzy line-of-sight by pinning the image to the player, etc. This method should work with all effects so you should be able to do things like apply a wave effect just above the ground to imitate a hot sunny day, etc.