If you live in or around or even visit TN, you will hear this often.
Example:
-A pregnant woman forgetting her keys or where she parked her car in a parking lot...
someone would look at you 'bless your heart'
-You show up to a Doctors visit on the wrong day or time-
the receptionist says 'bless your heart'
-Try to use a coupon that expired the day before... not knowing it
expired.. the cashier would say 'bless your heart'
This basically means that you're stupid, and the person saying it feels bad for you. You may think that it's nice, but it's really an insult.
Person 1: I wonder why the Sun orbits the Earth
Person 2: Oh, bless you heart!
Bless your heart: It's an insult in Southern dialect, and means you're stupid.