You're talking to someone at a party. He sneezes and you say this.
"Bless you!" is the standard response whenever someone sneezes near you. You should say "Bless you!" when you hear someone sneeze:
B: Bless you!
You can use this expression with people you know, or even with strangers. The word "bless" is usually related to religion, but in this phrase it doesn't really suggest anything religious. It's just something that people say.
When someone says "bless you", you can respond with "Thanks" or "Thank you."