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I took an image of a dark bar with a bright sign at night using auto mode:
ISO 1250 | 1/60s | f/2
What I actually wanted is to be able to read the sign in the background. On this image it is obviously much too bright, and you can't read what the sign says. I tried reducing the shutter speed:
but now everything else is too dark.
What could I have done in order to take the photo so that I could see both the bar itself and the sign?
You could've probably got a decent result just by picking an intermediate exposure.
Alternatively, you can try to take a short and a long exposure of the same scene, and combine them digitally afterwards. Here's what I got just by taking your two images above (mouse cursor and all), aligning them (manually, using the Scale tool in GIMP) and blending them together at various ratios:
25% short exposure + 75% long exposure:
50% short exposure + 50% long exposure:
67% short exposure + 33% long exposure:
Just play with the mixing ratio to get the feel you want.
(It's also possible to apply non-uniform masking to get an exposure fusion effect, as in this example. However, in my quick attempt I didn't manage to obtain any particularly nice results from your image that way. YMMV, of course.)
In general, I would also recommend always shooting RAW, both to better capture the full dynamic range of your camera, and also to avoid the ugly digital clipping of overexposed areas. For the latter, it helps to underexpose your shots a little (say, −⅓ to −1 EV; more if you're shooting a dark scene with bright elements like here) and then pull the exposure up on your computer, using the "soft highlights" mode in your RAW editor.
The dynamic range of cameras is limited and is unable to capture large brightness differences within one shot. For static subjects use Exposure Blending or HDR preferably on a tripod or similar stable base. For exposure blending you take multiple shots of the same composition but with different exposures. Those images then get merged together by using an image editor with a layer for each exposure. Tools like enfuse can do this automatically. Your posted examples would fit for the different exposures, but do not have the same composition.
For moving subjects this approach can lead to "smeared" parts or ghosting. I recommend shooting in RAW, try to get a exposure where only the white in the sign itself is blown. The next steps is using an RAW editing software to pull the shadows up and see if you get enough detail. In this scene however the darker parts could be really noisy then. Dynamic range and light capturing ability of the camera are likely to be stretched to their limits in this scene.
Normally you would use the histogram of your camera as aid to "expose to the right", but it could be misleading in this case, as part of the light will always be saturated if you try to simultaneously capture the darker parts.
Another approach would be to expose the sign correctly like you did in your second shot. Simultaneously light up the scene with a flash bounced from the ceiling.
For a more sophisticated shot one could use one or more flashes off camera to increase control over the light.
