Gravitational microlensing surveys target very dense stellar fields in the local group. As a consequence the microlensed source stars are often blended with nearby unresolved stars. The presence of `blending is a cause of major uncertainty when determining the lensing properties of events towards the Galactic centre. After demonstrating empirical cases of blending we utilize Monte Carlo simulations to probe the effects of blending. We generate artificial microlensing events using an HST luminosity function convolved to typical ground-based seeing, adopting a range of values for the stellar density and seeing. We find that a significant fraction of bright events are blended, contrary to the oft-quoted assumption that bright events should be free from blending. We probe the effect that this erroneous assumption has on both the observed event timescale distribution and the optical depth, using realistic detection criteria relevent to the different surveys. Importantly, under this assumption the latter quantity appears to be reasonably unaffected across our adopted values for seeing and density. The timescale distribution is however biased towards smaller values, even for the least dense fields. The dominant source of blending is from lensing of faint source stars, rather than lensing of bright source stars blended with nearby fainter stars. We also explore other issues, such as the centroid motion of blended events and the phenomena of `negative blending. Furthermore, we breifly note that blending can affect the determination of the centre of the red clump giant region from an observed luminosity function. This has implications for a variety of studies, e.g. mapping extinction towards the bulge and attempts to constrain the parameters of the Galactic bar through red clump giant number counts. (Abridged)
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