It's generally regarded as cheating. For me it depends kind of... if you blur layers together then I definitely don't consider it a vexel but if there are somewhat blurred but distinct layers of color then I get a little iffy. I don't personally like the way it looks as far as vexels go but sometimes I still consider it a vexel.
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I know a lot of people use that as a technique for 'airbrushing', so I wouldn't consider it cheating, it's just not a vexel anymore.
I was thinking about that earlier... it's kind of weird to use the word 'cheating' if someone's creating a graphic themselves, right? I mean... if they're not pasting the original image in and claiming it isn't there then it's not cheating... or if they're not blurringit a bit and saying it isn't blurred then it's not 'cheating' the question should be 'is it vexel' : P Which I know is basically what is meant but it but it does confuse some people (poor them!)
But this is an interesting question... how is it more/less vexelly to make something and blur it a bit than to pile on layer after layer at 5% and then it becomes so smooth you can't tell it's vexelled? I mean, that's what a lot of beginners are aiming to achieve, I think, so they're trying to find the quickest way there.
I definitely see things sometimes that are blurred -a bit- but have defined colored areas and consider that to be vexel.
I think if you still see the shapes clear enough it's not 'cheating', but I also think it doesn't make your vexel more pretty.. you could try gradients and transition layers for a smoother look =)