There are 2 ways to edit a language file:

1. From web interface from Administrator Panel / Templates / Language Editor
2. Download and translate the file lang/LANG_ID.php on your computer (using any text editor) and then upload it back to your server.

If you choose to translate from web interface please press Save button from time to time because if the login session expires and you did not saved your work you will loose it.
When you translate, you only need to translate the second part, for example in this line:

$lng['navbar']['home'] = 'Home';

You only need to translate the part colored in red.

If you have a single quote in the text, you need to put a \ (backslash) in front, like in the example:

$lng['users']['errors']['passwords_dont_match'] = 'Passwords don\'t match!';