Almost a week ago I added blur effect to KWin. It's purpose is to blur background of translucent windows to make text in such windows more readable. With standard translucency, if there's a window containing text below a translucent window, then the text in the translucent window is hardly readable. The effect blurs out fine details such as text, resulting in much better and usable transparency. While the background windows are blurred, they're still visible enough to see movement or changes, making transparency useful for e.g. monitoring activity of Konsole windows.
I've made two videos as well. First one (YouTube link, direct link) shows just a silly demo effect that applies some waves to your desktop. It's not physical simulation of liquid, though that would now be possible as well in case anyone's interested ;-)
The second one (YouTube, direct) shows the blur effect itself. Also note that in conjunction with the fade effect, which makes windows smoothly fade in/out when they're created/destroyed, it blurs out background of new windows when they fade in. It's subtle, but you can see it with menus in the video.
Update: added YouTube links for both videos.