The outline of the mountain was blurred by the fog.
Literal
Fog [for-のため] mountain [possessive-の] outline [subject-が] was-blurred.
輪郭 ('outline, silhouette') is a fairly specific noun. ぼんやりしている ('is hazy/dim/vague') — ぼんやり is a mimetic for mental haziness or visual blur. Both senses are common.