What does it mean to "Bless the LORD"? Psalm 103:1-2  (KJV)
  Bless the Lord, O my soul:
  and all that is within me, bless his holy name.
   Bless the Lord, O my soul, and forget not all his benefits


What does it mean to say "Bless the Lord"?. It is more logical that the superior one should bless the inferior one. We are sinners and the LORD is far more superior than us. We should be asking blessings from Him. But what does it mean when we bless the Lord? 

There are many songs using this phrase like  this beautiful song.

We are sinners and how can we bless the Lord? What is the exact use of this sentence? If I am simply telling my soul to bless the Lord then I think it's reasonable. But can it be used while praying and say "Lord, I bless you"? I feel uncomfortable at this. 

Is this a translation issue?  What is the meaning of this phrase and what is its usage?
To bless is related to to consecrate. Both imply an act of recognizing and/or declaring and devoting something to have a particular purpose or holiness.

If a father blesses his son's decision in a matter, we mean that the father supports and acknowledges the decision.

If a priest blesses a marriage, he declares, with the approval of the whole Church in the case of Catholic + Orthodox priests, the marriage to be a approved, valid, and holy.

Similarly, when a person or group blesses God, they declare their approval and recognition of God's value, holiness, and "worshippableness" in their own "private" world. It is similar to, but distinct from, praise.

And a blessing always demands a particular type of treatment of the blessed object or person. In the case of God, it demands worship.