Alright. Wondered what the purpose of motion blur is. Is it used to create a better "film-look"? I know that you use it in fast pace things such as a car race, but do you use it for everything like people walking?

Well, films (35mm, 16mm) are shot w/a 1/48 shutter speed because of the 180 degree shutter angle most film cameras are set at. But manipulating the shutter speed in digtal camcorders, or the shutter angles in film cameras, all depends on the cinematographer's aesthetic choice. It doesn't necessarily make a better "film look" in digital, but for normal scenes, I'd (personally) keep the shutter speed on your camera at 1/60 or closest to 1/48 because that closely mimics the film motion. But it is simply a matter of taste, and/or how it relates to the scene you are shooting.

Wave your hand in front of your face . . . was it blurry or clear? Blurry right?
That's always how I thought that's what motion blur was, if anyone knows for SURE I'm wrong please correct me!

Technically, we're both right.

the lower the shutter speed the more blur you get. its a matter of the shutter being open longer and the film (or CCD) absorbing light for a longer period of time, and therefor, from a larger area of an objects path.

i personally like motion blur and shallow DOF blur - as long as the subject is in crisp focus.