Check this tutorial out:
"Circle the keywords"
http://msmvps.com/blogs/tohlz/archive/2006/08/21/108538.aspx
There's also a similar effect in this sample:
http://www.awesomebackgrounds.com/cool-powerpoint-animations.htm

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Shawn Toh (tohlz)
Microsoft MVP PowerPoint
Site Updated: May 19, 2007
9 new PowerPoint Artworks
http://pptheaven.mvps.org
PowerPoint Heaven - The Power to Animate
> Is there a way in powerpoint to circle part of a picture and make it look
> like you are actually circling it with a pen?