Doctor's and Adriano's answers are correct, but not exactly right.
"Se habla español" has no direct translation to English because the language differs from Spanish.
"Spanish is spoken" translates literally to "El español es hablado", even though it's not a common phrase.
In Spanish you can conjugate certain verbs without having a subject. For example, "Llueve" is literally translated to "rains", but that's not a correct sentence in English, where you must say "IT rains".
Having said that, "Se habla español" means that someone has the hability to speak Spanish (implicitly: in that store, hospital, etc), but doesn't specify a subject.