One of the key differences is that logical relations are used as a technique for showing that a class of programs (eg, input to a compiler) correspond to another class of programs (eg, the output of the compiler), whereas simulation relations are used to show the correspondence between two programs.
The similarity between the two notions is that they both define a relation used to show the correspondence between two different entities. In some sense, one can think of a logical relation as a simulation relation that is defined inductively on the syntax of types. But different kinds of simulation relations exist.
Logical relations can used to show the correspondence between a language such as ML and its translation into assembly language, as in the paper you read. A logical relation is defined inductively on the type structure. A logical relation provides a compositional means for showing, for example, that a translation is correct, by showing that the translation is correct for each type constructor. At function types the correctness condition condition would say something like, the translation of this function takes well-translated input to well-translated output.
Logical relations are a versatile technique for languages based on the lambda calculus.
Other applications of logical relations include (from here): characterising lambda definability, relating denotational semantic definitions, characterising parametric polymorphism, modelling abstract interpretation, verifying data representations, defining fully abstract semantics and modelling local state in higher-order languages.
Simulation relations are generally used to show the equivalence of two programs. Typically such programs produce some kind of observation, such as sending messages on channels. One program P simulates another Q if P can do everything that Q can do, though perhaps more.
Bisimulation, roughly, is two simulation relations put together. You show that program P and simulate program Q and that program Q can simulate program P and you have a bisimulation, though additional conditions are generally present. Wikipedia's entry on bisimulation is a good (more precise) starting point. Thousands of variants of the idea exist, but it is a fundamental idea that has been reinvented in more or less the same form computer science, modal logic and model theory. Sangiorgi's article gives a wonderful history of the idea.
One paper establishing a relationship between the two notions is A Note on Logical Relations Between Semantics and Syntax by Andy Pitts which uses logical relations, ultimately a semantic notion defined syntactally, to prove a certain property about applicative bisimulation, which is a purely syntactic notion.