Each line contains two parts. For example, in the English version of "storyline_strings.txt":
Code:
Hoist the Colours{Hoist the Colours}
The first part must be left untranslated. This is what will appear somewhere in the game code.
The second part is between the {}. That is the part which you translate.
So the game wants to show "Hoist the Colours" as the title for the story. You have chosen to play in Spanish. The game looks for "Hoist the Colours" in the Spanish version of "storyline_strings.txt", then displays whatever it finds in the {}.
Look at "RESOURCE\INI\TEXTS\SPANISH\Storyline\Hornblower". The files there have already been translated into Spanish. That is why, when you play in Spanish, you will see the title and description of the story in Spanish. If you're playing the storyline, you will eventually meet the Earl of Edrington, which in Spanish should appear as "El Conde de Edrington".