1. An image processing apparatus comprising: an unit adapted to acquire a position and orientation of a user's viewpoint; an unit adapted to acquire a position and orientation of a physical object of interest; an unit adapted to acquire an image of physical space including the physical object of interest; a decision unit adapted to decide a region of the physical object of interest in the image of the physical space; an unit adapted to arrange a virtual object in virtual space at the position and orientation of the physical object of interest; an unit adapted to generate an image of the virtual space based on the position and orientation of the user's viewpoint; a determination unit adapted to determine an area of a region to be blurred based on an amount of shift between the physical object of interest and the virtual object in the virtual space; a blurring unit adapted to blur the region to be blurred in the image of the physical space, wherein the region to be blurred in the image of the physical space is determined based on the determination area of the region; a generation unit adapted to generate a composite image by superimposing the image of the virtual space on the physical object of interest in the image of the physical space that has undergone the blurring processing; and an unit adapted to output the composite image.