It also appears in...
Wherefore Saul returned from pursuing after David, and went against the Philistines: therefore they called that place Selahammahlekoth. 1 Samuel 23:28
And here...
He slew of Edom in the valley of salt ten thousand, and took Selah by war, and called the name of it Joktheel unto this day. 2 Kings 14:7
A possibility...
At some time, Selahammahlekoth, was either shortened or another place was named in part after it. An exclamation resulted from something that was relevant to that place.
The use of the word Selah appears to be an exclamation similar to Amen which was never translated from Hebrew to English. Unlike Amen, it appears that the original translation of the word Selah has long been lost.
Studying what took place at Selahammahlekoth or Selah and looking at how it is used in context in scripture may reveal what it was supposed to mean.
Something interesting to note is that David wrote the majority of the Psalms. Selah was a city that existed in the time of David and Solomon (also wrote some of the Psalms). So I would have to say that it had to have something to do with that city and what it either stood for or what the name meant.
Habbakuk 3 is the only other chapter in the bible other than Psalms and the verse I posted above that mentions the word, Selah.
I know this isn't really an answer, but maybe it will lead to the answer. Let me know if you discover anything on this.