The literal meaning is this:
The closer you look at a word, the farther it looks back (at you).
The part "at you" (zu dir) is not necessary in German, but I think the English translation would be incomplete without it (English is not my native language, so I'm not sure).
The figurative meaning is this:
The more you try to analyze a particular word, the stranger it seems. By trying to approach the word, it seems to become all the more unapproachable.
Karl Kraus, the author of this sentence, published it as a note in his satirical magazine Die Fackel, which he edited from 1899 until his death in 1936 in Vienna, where he lived. This magazine is, beside the drama Die letzten Tage der Menschheit (The Last Days of Mankind), the main work of Karl Kraus. In this magazine is a section titled »Pro domo et mundo« (this is latin and translates to English as: "for the house and the world" and means "On my own and all others's behalf") and there he published such sentences as singular free-standing ideas. This particular sentence stands in issue 326-328 (three issues in one) from July 8, 1911 of Die Fackel on page 44.
It was also asked, if "desto ferner sieht es zurück" can be interpreted as "the farther back it seems to be".
The very clear and unambiguous answer is: No.
We have this pair of translations:
- Es sieht zurück. = It looks back (at you).
- Es sieht so aus. = It looks like. (It seems to be.)
The difference is the semantic role of the subject. The syntactic role is the same: Both sentences are in active voice, so the subject is the grammatical agent.
But semantically there is a huge difference:
Sentence 1 means, that the subject (it = the word) really actively does something: It slowly turns its head towards you, looks at you, opens its eyes wide and stares at you from a distance with an evil stare. The word has a mind and a will. It doesn't want to be watched. When you stare at it, it stares back. When you approach it, it moves away. It is a living being that reacts to its environment and would prefer to be left alone.
Sentence 2 is completely different: The subject (it = the word) is a completely passive entity. It does nothing but just exist. Others look at at it and others see it. Those others get the unreal impression that the word moves away when they approach, but in fact the word does absolutely nothing. The word is just a lifeless bunch of letters, not even able to perceive what is happening around it, let alone react to it in any way.
Karl Kraus very clearly wanted to express the first meaning, not the second. - Keep in mind that this sentence was published by a famous satirist in a satirical magazine.