This should be simple: How do I soften hardened brown sugar?
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Heat it in the microwave (in a dish, covered) -- 15 seconds at a time -- until it's soft.
IMHO I would thorw it away... but! If you put it in a blender it should break it up to where it's usable. Sounds like the moisture is all gone, should still taste okay.
Tape a damp paper towel to the underside of the lid, seal it up, and let it sit for about 1-2 hours. The sugar will re-absorb moisture from the paper towel and soft right up.
Put a few slices of apple in the bag of sugar and seal it up. Works like a miracle.
Syronai's method is good. I was going to suggest a damp kitchen towel.
The kitchen towel and apple tricks are the best when you have time because they'll add moisture back to the sugar. The microwave method is for when you're in the middle of making a recipe and need to soften it quickly.