Check out the Expose jquery plugin from the jQuery TOOLS collection. I think it will accomplish exactly what you are looking for. They even have a demo of styling the mask with a background image.
Due to the irregular shapes, you're probably looking for an image. And due to the need for varying levels of transparency, you probably want a .png that would just be stuck over the selected item.
Good question, one way would be to have a "selected" png that had the glowing circle cover the selected one, and a different just dark png cover everything else.
EDIT: But you would probably want to use a library like jquery rather than coding everything from scrath your self, as to not reinvent the wheel and save TONS of time :D