Media literacy essentially means not believing everything you read or hear in the media. It means that when you read or hear something in the media, you need to be able to analyze it and think critically about it so you know whether you should believe it or not. So... media literacy is the ability to analyze stuff you hear or read and make judgements about how believable it is.
Why is it a big deal? Well, everything we know about the world around us comes through the media (except what we can actually see for ourselves). The only way I know about global warming, or the war on terror or health care I know because I read or heard about it. So if I don't have any media literacy I have no clue whether what I'm hearing or reading could possibly be true.
This is especially important today when there are so many ways to get information, especially on the internet, that may or may not be credible.
Media literacy refers to the development of skills and knowledge required in the area of broadcast video production, sound editing, movie editing, and all forms of web-based journalism, entertainment, and communication. There are a number of technologies and applications that allow media professionals - journalists, videographers, recording artists, producers and directors, etc. - to communicate via different types of media (television, streaming video, recorded video, computer-based tutorials, audio tapes, CDs, DVDs, etc.). Industrial standard applications include Apple Inc.'s FinalCut Pro, which is used for digital video production and editing (many movies and other video-based broadcast content is edited using this software). Another industry standard is ProTools, a sound editing software application by DigiDesign which is used by almost every professional recording artist/studio/producer making music today. There are others by Adobe (PhotoShop, Illustrator) that are commonly used in on-line communication, as the transition from hard-copy journalism makes its way to digital, or virtual, journalism. These are sophisticated software applications that usually require specific training to master and use on a day-to-day basis in a media-related industry. Think of watching an NBA basketball game on TV, and the instant replay. Think about the technology that is required to not only capture the play in live action and high definition (camera, digital information storage system - certainly not video tape) and the means to instantly record, edit, and replay that content. The people who know how to use the tools that make this type of experience possible are media literate, and the use of these and other high-tech tools is media literacy.