does it mean:
Can’t recognize that a forest is really a bunch of trees, or
Can’t see the forest because there are too many trees in the way
Origin of the phrase (Huey Lewis?)
It means you are so bogged down in the details that you can’t see the bigger picture. That you’ve lost sight of the goals because you are too focused on tactics.
More the first: “Forest? What forest? All I see are a bunch of trees here?” I understand the idiom to refer to someone who misses the big picture because they’re too focused on (or distracted by) the immediate details.
You keep fiddling with your smartphone and texting over something that can wait, forgeting your sole purpose at that moment is 100 percent attention driving your vehicle safely.
http://dictionary.reference.com/browse/can't+see+the+forest+for+the+trees
Imagine you need to hire someone for a job, and you need someone RIGHT NOW. You have two equally qualified candidates and you can’t make a decision because you’re trying to find that one, important difference between the two. Meanwhile, deadlines are missed, revenue is lost…
Just pick one of the damn candidates! Flip a coin if you have to, but we have deadlines to meet!!!
It’s like when someone asks a question in GQ about how an octopus swims, but the thread is derailed over how to correctly spell the plural of octopus. 
The equivalent in the song “Yankee Doodle” is “he swore he couldn’t see the town there were so many houses”.
Trees can’t see the forest because they are unable see, and even though you can see the forest you can’t do that for the trees. Every word of the phrase should be taken literally, there’s no other meaning to it.
Cite? I’ve never heard this idiom used as another way of saying, “You can lead a horse to water, but you can’t make it drink.”
Over 400 years old, acording to this guy:
Since Haywood’s saying it was already a familiar proverb, then there should be earlier versions and he found one:
Lots and lots of other stuff about the phrase on that page, including arguments to its meaning. Dictionaries agree with John Mace. I have never heard of anything in the world like TriPolar’s version, which I hope is a whoosh.
I got into a Facebook, um, argument? earlier today that I think is a good example.
FOAF saw this picture: Occupy Democrats - This just doesn't seem fair. Thanks to Lee Branen. | Facebook
and she went on and on about how it wasn’t a very good piece because, " “Attended college using Social Security funds” shouldn’t be used unless pointing out that he supports Social Security cuts. I’m sure he would prefer having his father alive over receiving Social Security for 2 or 3 years as a teenager, which probably was only about $200 per month. I think it would be more appropriate to compare the single mother to a political figure who benefitted from inexpensive college tuition and grants but is now rather outspoken about people needing to work their way through school without assistance, like Ben Carson."
And a few of us pointed out that the thing wasn’t about Social Security, it was about the fact that he didn’t have to work a job to earn his way through college, and this hardworking lady who doesn’t have the time or money to go to college is being called out on her lack of “work ethic”. That is wasn’t about hypocrisy, it was about a dumb-ass view of “work ethic” wherein poor people must be poor 'cause they’re lazy, when actually they work really hard - harder than him, arguably.
She couldn’t grok what I was talking about. She just kept glomming onto the Social Security sentence and the fact that he got it because his father was dead. She couldn’t see the forest - the intended message - for the trees - one of the details that made up the message.
Or maybe I was the one not getting it, I dunno. But someone had some foliage blocking their view of the big picture.
As someone else said, it means you don’t see the big picture. To take the metaphor literally, it means your standing somewhere and you see a bunch of trees in your way, what you don’t realize is that you’re in a damn forest because you aren’t the type of person to step back, take a breath, remove yourself from the situation for 2 minutes and realize that there’s a bunch of trees around you because you’re in a forest. You don’t need to find a way to get around these trees because there’s just going to be more, you need to figure out a plan to get out of the forest.
In real life, it’s like a boss that micromanages or a husband that keeps having all these little problems with his wife when his friends see that all these little problems aren’t the issue, they’re just symptoms of a bigger problem or business that focuses on the day to day problems when they need to focus on the long term systemic issues that are holding them back.
Basically, the tree in front of you isn’t the problem, it’s that your in the middle of an entire forest of problems.
Wait - Huey Lewis? As in Huey Lewis and The News?
Octoplurals.
This saying has been around forever. It means, as pointed out, that you can’t see the big picture because you’re bogged down in the minutia.
I thought the context was fairly obvious.
I have the impression that here in the UK, the saying is not used very often; when it is, it’s generally “can’t see the wood [rather than ‘forest’] for the trees”. Our family, in England, had an unusual variation: “can’t see wood for trees” (without the definite articles). It had the same meaning – counselling against getting bogged down in small details – but the actual wording had the sense of being unable to see, not a forest or a wood, but “wood” in the sense of timber. Thus, failing to see timber – needed for making things – for trees: forgetting that trees are the source of timber.
A friend and his wife took me to this scenic lookout on a minor mountain near where they lived. I told them it’d be easier to see the nature if they’d cut down all the trees that were blocking the view.
The opposite expression, “Can’t see the trees because the forest is in the way” (or any similar) is also used occasionally.
Once you’ve seen the forest (the overall problem) and formulated your strategy, sooner or later you reach the point where you have to actually implement your strategy, or hire a team of detail-wranglers to do so. At some level, somebody eventually needs to deal with all the details and minutiae.
Some people have a problem with that. They can grok the overall scene, but can’t manage to focus on the minutiae when the time comes for that. Then one can say “You can’t see the trees because the forest is in the way.”
Yeah, it was a jest referring to one of their songs. 
Apparently, some people can’t see the forest for the trees.