What's wrong with my Nikon D3000? - 1

I had bought it in december of 2010 and was just using it this morning to take pics of a kid so then I had to clean it and cleaned the lens with a micofiber cloth and was VERY VERY VERY gentle so its cleaned now.

Before and after with these pics of the kid, I used kid, auto and sports setting on the camera. The subject of the photo turned out fine but around the subject it looked rather pixelated and blurred out a little. I hadn't noticed it before with any of the other photos I have taking.

What could be going wrong? I'm shooting in JPEG fine by the way

Could you upload a sample shot to www.tinypic.com and post it here? Without seeing a sample it will be very difficult to diagnose a problem.

Sounds like you've changed modes of shooting and are now shooting in A (aperture priority) mode. When you chose a wider aperture (f/3.5 for example), you get a very shallow depth of field.

Believe it or not, this is an effect that amateur photographers are asking about here, over and over.
Just change the aperture setting (rotate the dial) or switch to P, S, or one of the other modes you've used before.

The only other idea I have might be that you've damaged the coating on the filter (I HOPE you have a protective filter) on the front of your lens.