When said behind a super harsh insult, it makes it seem like its okay.
Can also be used as an awesome come back and make the insulter feel like a moron.
Said with much emphasis.
Damn, Johnny you are such an idiot! God bless your soul.
Liz is such a two-faced hoe. God bless her soul.
Wow, what a dick. God bless her soul.
Adam: Wow Carol, you are so retarded.
Carol: Oh, God bless your soul.