The term literacy refers to the ability to derive and communicate meaning by the use of a variety of socially contextual symbols, such as print. It involves being able to read and write in such a way that is acceptable by the community.
1 Additional Answer
Literacy is basically being able to read write and comprehend. It is being able to function in these areas in a reasonable manner. Reading is the key to literacy but in order to be considered Literate you have to be able to do all three.