The blur on the weapon is depth of field blur rather than motion blur. As far as being built into the engine, I haven't seen it used in any of the other Source engine games yet, either motion blur or depth of field blur.

And honestly, if only the weapon is blurred (as opposed to other parts of the scene too), then it's not even true depth of field blur, it's just a trick they're doing with the weapon rendering.

Both kinds of blurring (motion and DOF) are fairly computationally intensive and would reduce the frame rate.

A recent World War 2 shooter game, Brothers in Arms, used blur on the weapons. That was kind of neat, but the game bored the heck out of me (and irritated me: Checkpoint system instead of save-any-time system) and I never finished it.