There are two tools that can help you cross that language barrier. The first is an implementation of Google Translate built right into local chat. You can turn this on with a Chat preferences setting.
When this is enabled, things that people say to you (in local text chat) are translated by the chat window. The English translation (or whatever language you’ve selected) follows their text entry.
This is great, but it doesn’t solve two problems: it does not work in IM, and it’s only one way. Unless the other person also has translation enabled, they are not going to understand what you say to them. The second problem can be overcome by wearing a translator HUD. By far the best one that I’ve found is Ferd’s Free Google Translator. You can get one at Caledon Oxbridge University or at White Tiger Help Island, among other places.
Ferd’s translator produces a translation in all the languages used by the avatars within its range. In crowded multilingual areas like infohubs and help areas, this can create quite a confusing result in local chat, as it spouts three or four versions of what you just said.
There’s not much you can do about IMs except cut-and-paste translations. You can do this with Ferd’s translator (by “muttering” to yourself on a private chat channel, then cutting and pasting the translated text to IM), or you can use an external browser window to access Google Translate directly and cut and paste from there.
There are two other problems with any machine translation. First, it’s not always accurate, especially for idioms or internet-style abbreviations. Speak as simply as possible and spell out all your words. Be prepared to say it again, in a different way, if the translator mangles your idea badly.
Second, all of these rely on the incredibly popular Google Translate API. Google has announced that they are discontinuing this API sometime around December of this year. This will likely impact SL’s ability to translate for residents.