What does the idiom/phrase "but I digress" mean?

Okay, so I know when to "but I digress"; I use it when I'm talking about something and then stray off topic and talk about something else, so in order to get back to the topic, I say "but I digress".

But the dictionary says that digress, a verb, means "to stray off of something, to wander from a path, or to turn aside, etc.". So when I say "blah blah blah, but I digress", it's like I'm saying "blah blah blah, but I stray off topic." So when I say that, do I mean:

blah blah blah, but I'm a person that usually goes off topic, so let's get back to the main topic.

Or do I mean:

blah blah blah, but I'm straying off topic, so let's get back to the main topic.

I'm pretty sure this (the second one) is what we mean when we say "but I digress", but shouldn't the correct English be "but I am digressing" or "but I digressed"?

I digress is relatively idiomatic, and thus, even though the present continuous would be normally used, i.e. "I am digressing" it isn't because it's been culturally solidified.

You mean the second sentence. The phrase is indicating self-consciousness of being off-topic, and therefore a return back to the original topic.

Digressions used to be a big plus for classical writers. It was considered cool to interrupt a battle scene that mentions a tribe of barbarians and launch off on a thousand lines or so of well styled prose giving a complete history of the tribe from Day 1, or some such. Or to launch off on a critique of one of your sources when referencing him.

These days these are put in footnotes, or even better endnotes to avoid breaking up the narrative flow. Styles have changed.

So the "but I digress" is a notice to the listener or reader that you have done this and are breaking back into the interrupted flow again.

We borrow this phrase from older references, more likely to use the simple present than the progressive one. But there is nothing wrong with saying 'Now I see.' or 'But that stinks!' So there is no problem with 'But I digress.'

It also holds a tone of 'as usual', when you avoid anchoring the present to the progressive form. In this case, I would always say 'But I over-complicate things.' or 'But I criticize too much.', because I am 'copping' to having a habit of the behavior I have just demonstrated.

In speech it can be used in a slightly different way than in literature. However the basic idea is the same. In speech we don't use that phrase to move from point to point. Can't you tell how redundant and possibly annoying that would be if every time we "digressed" from one topic to another we pointed that out. Naturally we assume the listener understands that we have strayed off topic. Therefore it is unnecessary to inform the listener of the original digression. So speakers have created overtime a system of informing the listener that one is returning to the original topic. In a sense this phrase would actually be more accurate if we said "but I have already digressed from the main topic, so I will digress to the original topic." But that's kind of a mouthful.