When someone says God bless you when you sneeze, is because they are wishing you well. It originated thousands of years ago and every country around the globe has its own way of wishing sneezers well. Visit http://www.loc.gov/rr/scitech/mysteries/sneeze.html for more details.
I've heard both that your soul may escape, or the devil may get in. My grandmother said she thought it's because, in really old times before modern medicine and antibiotics, any illness you had could turn into something that could kill you, and people wanted to bless you before it was too late.
Long, long ago people thought that your soul left your body when you sneezed so they would say, "Bless you!" or "Gesundheit!" (good health) so that it would return to your body and you wouldn't become possessed by an evil spirit.
Or Justin Bieber.
These days it's just a social custom.
One morning I said, "Gesundheit!" to Daizy. She said, "I didn't sneeze. I coughed." Then she thought about that for a few seconds and said, "You never listen when I cough."