Milton is using a poetic conceit in this tribute to William Shakespeare. He suggests that Shakespeare deserves a monument comparable to one of the pyramids of Egypt but that it is unnecessary to spend "the labour of an age" in constructing such a monument because the great poet has built his own more impressive and more durable monument in the hearts and minds of his present and future readers.
Thou in our wonder and astonishment
Hast built thy self a live-long Monument.
Shakespeare himself stated in many of his sonnets that his poetry would be immortal. Therefore, Milton is only repeating what Shakespeare himself has said. This is appropriately humble. It is almost as if Milton is suggesting that he hardly needs to say anything original himself because Shakespeare's greatness and immortality are self-evident in his published works.
The most significant lines in Milton's sonnet are:
Then thou our fancy...
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of it self bereaving,
Doth make us Marble with too much conceaving;
And so Sepulcher'd in such pomp dost lie,
That Kings for such a Tomb would wish to die.
The suggestion is that Shakespeare's readers are overcome with awe and wonder, that they are spellbound and paralyzed, so that they resemble marble statues. This is, of course, exaggerated praise, but Milton is taking poetic license to invent a poetic conceit.
Milton's sonnet "To Shakespeare" strongly and intentionally resembles Shakespeare's own sonnet #55, in which he tells his loved one:
Not marble, nor the gilded monuments
Of princes, shall outlive this powerful rhyme;
But you shall shine more bright in these contents
Than unswept stone, besmear'd with sluttish time.
The line "Than unswept stone, besmear'd with sluttish time" may have been one that filled Milton with "wonder and astonishment." Shakespeare is implicitly comparing a marble headstone in a cemetery to a marble step in front of a townhouse which has acquired a greenish patina because the sluttish housemaid does not sweep it before mopping it, as she should, but runs a wet mop over the unswept stone and just smears the dirt around. Time, in the metaphor, becomes like a sluttish housemaid.
Both Milton's and Shakespeare's sonnets proclaim that inspired thoughts can outlive the most magnificent edifices. This is a simple truth. Homer's Iliad and Odyssey, for example, have survived and are read in many of the world's languages, while Troy itself has vanished.