Here is my response.
This is an excellent question, and is often asked.. God is all knowing. He knows the thoughts and desires of our hearts. And yet, we say that we should confess sins to the pastor and receive absolution. This seems an unnecessary step in the process. Could we not just think about our sins, and be forgiven?
To answer this we need to understand what it means to “confess”. There is another thing we “confess” in the Divine Service: The creed. So let’s ask the question of that as well. “Why do we have to confess our faith to God if he is all-knowing and already knows our faith?” What does it mean to confess our faith? It means to speak back to God what he has done for us. That is, we repeat back to God what he has told us in the Gospel. He created, redeemed, and sanctified us, and we respond to his grace by speaking these words back to him. Is it necessary? Yes and no. It isn’t specifically necessary, and yet God demands that we do it. Just as he demands that we pray. Why does he do this when He already knows what we will ask before we ask it. He wants to hear us ‘speak’ the words. Just as a husband or wife should say “I love you” to their spouse at least once a day, so God wants to hear from us. It would not work for a marriage to have the husband and wife say, “I love you” only on the marriage day, and assume that, until something changed, no further comment was necessary. Just so, God wants to hear our prayer. He also wants to hear our confession.
In the case of the creed, this is our confession of the Gospel – what God has done for us. In the case of the confession of sins, we are “considering our place in life according to the Ten Commandments.” That is, we speak back to God what he has said to us according to the Law. Why? So that we can hear from God the Gospel: The good news of forgiveness freely given for Jesus’ sake.
So when we confess sins, we speak back to God His Word regarding the Law. When we confess the Creed we speak back to God His Word according to the Gospel. In both cases we are doing nothing more than responding to God’s Word by speaking God’s Word back to him. This is like a husband or wife saying “I love you” and hearing back, “I love you, too.”
The confession of sins also allows the opportunity to hear that Word of Gospel spoken specifically to sins we have committed. It is applying the specific word of the Gospel to specific actions. It is one more way that God gives salvation to his people.
I realize that this is a little TL/DR for FB, but I think it was worth the words.
Also, (SHAMELESS AD ALERT) this is covered in session 22 of “Teach These Things: Catechesis for the Lutheran Parish.”