If you have the BCC plugin there is an effect called ‘Witness Protection’ which is exactly what you want.
If you have Media Composer you can use the Paint Effect to draw a circle and animate position and size. There are a variety of fill options including mosaic and blur.
If you only have Xpress Pro (were there is no Paint Effect) then the best way is to drop a Mosaic (possibly Pixelate?) effect on filler above the clip, you can then drop a Circle Wipe on the track. By keyframing the Level and position you can animate the size and location of the circle.