Poet Wilfred Owen served during World War I until he was killed in action in 1918. His poem "Dolce et Decorum Est" captures the horrors of war. Owen uses his opening stanza, in which can be found the phrase in question, to describe men marching back from the battle front line to their campsite. We know they are marching away from the front line towards their campsite because he describes the men as turning their backs "on the haunting flares," meaning the flares from the artillery, and beginning "to trudge," meaning wearily walk "towards [their] distant rest." He continues using very vivid imagery in this stanza to describe the condition of the men.
He describes the marching soldiers as "[b]ent double, like old beggars" under the weight of their gear. They are also so exhausted that they are pretty much marching in their sleep, meaning that they are wearily walking with their eyes closed. Based on his description, during the recent battle, apparently men "lost their boots," and since walking over rugged and dangerous terrain barefoot certainly causes injuries on top of any injuries they've already received in battle, the barefoot soldiers are limping, "blood shod."
In the lines containing the phrase in question, he continues to describe the condition of the soldiers using what can be considered slight hyperbole:
All went lame; all blind;
Drunk with fatigue; deaf even to the hoots
Of tired, outstripped Five-Nines that dropped behind.
In the clause, "All went lame," the word lame means "crippled or physically disabled," even "limp" (Random House Dictionary). Since the soldiers have just been in a major battle and some are returning without shoes, it certainly does seem very likely that all the soldiers are limping. We also know that "all" refers to the soldiers he begins describing at the very beginning of this stanza. However, the phrase "all blind" can be considered slightly hyperbolic since not all of them, if any of them, are literally blind. He is simply describing them as blind because, as he said earlier, they are walking with their eyes shut. They are also so exhausted they are staggering as they limp and walk, as if they are drunk, and so exhausted that they are oblivious to any noises going on around them, even oblivion to the falling Five-Nines, meaning the "5.9 calibre explosive shells" (The War Poetry Website, "Dulce et Decorum Est").
Hence, we know that in saying "all went lame," he is describing the injured and weary soldiers walking with limps or even more severe disabilities, which is certainly a very appropriate description of men returning from battle, especially in one of the world's bloodiest wars.