You could do this using the mask() method on the images to control their alpha channels:

PImage img;
PGraphics stencil;

void setup()
{
 img = loadImage("img.jpg");
 size(img.width, img.height);
 stencil = createGraphics( img.width, img.height, JAVA2D );
}

void draw()
{
 // draw a circle to the stencil at the mouse position
 stencil.beginDraw();
 stencil.background(0);
 stencil.ellipse(mouseX,mouseY,200,200);
 stencil.endDraw();

 // apply the stencil to a copy of the image
 PImage maskedImg = img.get();
 maskedImg.mask(stencil);
 
 // invert the stencil
 stencil.beginDraw();
 stencil.filter(INVERT);
 stencil.endDraw();
 
 // apply the inverted stencil to another copy for the background
 // and desaturate it
 PImage bgImg = img.get();
 bgImg.mask(stencil);
 bgImg.filter(GRAY);
 
 // draw our two images
 image(bgImg, 0, 0 );
 image(maskedImg, 0, 0);
}