I had always wanted to know where this one came from. So, I sat down and started looking for it and BINGO!

Admiral Lord Nelson of the British Navy lost his left eye during a battle, at Tenerife, while still a Captain. Later on, while a junior admiral or Commodore, he was in a battle, Copenhagen, under the over-all command of Fleet Admiral Earl St. Vincent. During the fighting, Vice Admiral Parker sent a signal to Nelson to get closer to him. Nelson, however, had seen a gap in the enemy battle line, and knew he could win the battle if he sailed into it instead, thus splitting the enemy fleet. Rather than flagrantly disobeying orders, he simply held up a telescope to his blind eye and said, "I don't see the signal," and thus went on to win the battle. Since that time, this term is used when a high ranking official chooses not to see a situation.

Sort of like in the movie, “In Harms Way.” When Pearl Harbor is being attacked and the ships that can get underway do so. The USS Cassiday is getting underway and the captain is chasing them in his gig. The OOD and boats see him but decide it is better to head out to sea.