Digma's focus is analyzing observability. The basic premise is that there is a lot of useful information in logs traces and metrics - they just require a lot more processing to glean any insights you can actually use as a developer. You can think of Digma as a data pipeline. Its main concern is not storing a lot of raw data but aggregating and processing it continuously, looking for anomalies, changes, and useful analytics.
Digma ingests observability based on the OTEL standard (which it can also automatically collect using the IDE), processes the data, and then exposes insights to the IDE plugin which can map and connect it with the code.