One of the things that quickly ruins a Christian witness is that we don't trust God's word. Genesis 1:1 is the most challenged verse of the Bible. Make it untrue, and there's really no need to trust any of It.
This is a common false belief of Christian Fundamentalists. There IS error in the Bible (not 'God's Word'). So what? That just means we are going to need to make more of an effort to get at the truth in some cases. Believing that your English translation of the Bible (as we know it) is the entire 'Word of God' and is inerrant (without error) is a position of willful ignorance of history and Biblical Textual Criticism. The idea that your English version of the Bible is the 'inerrant Word of God' is taught (and repeated like a mantra) in Christian Fundamentalist Churches throughout the world (I know...I was an active member at one for a long time). However...it is not only not necessary to believe that to have a relationship with the Most High God through Jesus Christ...it blasphemous. See this:
http://en.wikipedia.org/wiki/Bibliolatry
Unfortunately...when many Fundamentalist Christians continue to seek and eventually find out that their Bible is not the 'inerrant Word of God'...they often lose their faith (see: Bart Ehrman). This happens when people put their faith in the specifics of a book rather than the message contained. It works as long as you continue to come up with answers to Bible contradictions and problems...and continue to repeat the mantra. Jesus never said we had to believe this stuff. He said he is the way and to believe in him. Believing the Bible is the 'inerrant Word of God' is not only blasphemous (IMHO)...it also causes man to come up with all kinds of bad (false) doctrine.
Christians are supposed to be the salt of the earth. We're supposed to salt and not be salted.
Salt tastes good on popcorn.
We have progessively gotten to a point where we have bought into what the world teaches over what God's word says.
No..."we"...have not. "We" got that way before and God flooded the earth. And "we" got that way shortly thereafter. History. That is one of the things that Christian Fundamentalists aren't big on. Do you know what was going on in the Roman Empire...hello!
Instead of bending our science to fit His word---His absolute truth---we set about adopting a view that authors confusion and calls His truth to be rejected as truth, while attempting to bend His word to our "best guess" at truth.
Some do that...I agree...but "we" do not. The Most High God created everything...and science helps us to understand some of what he created. Off-topic though.
So...on to answering the OP question. How do we interpret the Bible? Great question. We know how the fundamentalists interpret the Bible. I call this "lazy-man's interpetation". They use the doctrine of man to harmonize what would otherwise be an errant/contradictory collection of texts. Which Bible do you want to interpret? The NIV, KJV, ASV, NKJV, NASV, YLT, etc, etc? I've read commentary that convinced me that the KJV was the superior text for a number of reasons. Then...I've also read other commentary that convinced me that the KJV was from the devil and the NIV was superior. Here's what I do...
1. I look at all the English translations to capture the spirit of the text. If they contradict, I choose the one that is most in-line with freedom from the law and the royal law of love.
2. I try my best to consider the intended audience.
3. I read it in context and try to avoid "cherry-picking" (although we've all been guilty of that lazy action at times).
4. I pray for wisdom and understanding and that God would guide me given that I have his Holy Spirt.
5. I no longer rely on man to tell me what the Bible means (too many false teachers).
6. I now concentrate on the teachings of Jesus and some of the expansions of those teachings by Paul and James.
Free Hugs,
CC