Motion blur is exactly what it says. When you're running or moving fast, the screen goes blurry. Film grain is like a noise over the picture a bit like interferrance or looks a bit like your tv is a bit out of tune. These are just visual effects to make the game feel more realistic
Motion blur makes the game look more fluid (think real life) by bluring the camera while it moves, it can also smooth out juttery frames while turning etc.
Film gran is a cheap gimmick they decided to put in to make it seem more like a gritty horror movie, it's aweful, leave it off.
Just finished FEAR 2 tonight actually. You need to play it on hard though. Sometimes you might need to switch to normal when you're a bit stuck and without and health, but hard setting is about right. Could do with a very hard setting really. Great game. Really enjoyed it.
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