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I heard it many times and I could infer that it means "all the time" or "without pause", "constantly". (Am I right?) But when trying to look it up, none of the dictionaries define it. Is this a correct English phrase?

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It's correct, or can be. It would help if you have an example with context. – Hugo Feb 5 '12 at 22:19
It seems likely that the question is about uses such as: It's getting worse by the second. – Brett Reynolds Feb 6 '12 at 3:06
I'm voting to close. What would OP make of by the minute, by the hour, by the day, by the week, etc.? – FumbleFingers Feb 6 '12 at 4:41

2 Answers

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By the second means per second or for each second (of time).

For given telephone base rates and whole-unit billing, your bill will be cheaper when charged by the second than when charged by the minute: Say you made a one minute and five second call. If you are charged by the minute, and each minute costs 60c, it would cost 120c. But if you are charged by the second, and each second costs 1c, it would cost only 65c.

Some other uses emphasise rapid change:

  • News by the Second means news for every second, news that is constantly updated.

  • More Lost by the Second means more is lost every second.

  • James Murdoch's perch gets shakier by the second means his footing becomes looser as the seconds pass.

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Cell phone service providers offer billing method known as by the second. You pay for the seconds used.

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