This term can also be used to put a serious twist on your joke, and frequently intensifies the situation.
It is also used to make a joke more humorous, this is called backing-up(usually used after your not-so-funny-joke)
Person 1: Yeh i got a vest the other day!
Person 1: but seriously
Person 1: I've got a vest....jokes....but seriously
Person 1: Vest are only for 'homos'
Person 1: but seriously!