Use when actions or words cause the situation to become more difficult or problematic. Arguing with the boss about your mistake will only dig yourself into a hole.
Pro Tip 2/3
Metaphorical Use
It's never about literally digging; it's about getting into trouble in a metaphorical sense. Telling lies to cover up only made him dig himself into a hole.
Pro Tip 3/3
Figurative Deepening
The deeper the hole, the worse the situation becomes. With every missed deadline, she dug herself into a deeper hole.