In traditional literary theory and criticism, scholars analyze works of literature, and, using critical procedures, they determine the truth and meaning of those works. The focus of those truths changed a bit with the Romantics; it became a bit more subjective and more of a personal access to truth. But even then, there was this humanistic notion that great literature could or should convey some universal truth.
Beginning with the New Critics and Formalists of the early twentieth century, the focus shifted from truth and great literature to how literature conveys that truth and what makes literature different from other types of writing. From there, we move to structuralism, which uncovered the interdependence of meaning. With the advent of other theories (Marxism, feminism, New Historicism, and deconstruction), the field became more specialized with competing theories of how meaning is produced and consumed. Is it the author's intent that matters? Is it his or her historical context? Is it the isolated text itself? Is it the political climate of the author or the political bias of the reader? You can see the increasing complexity of what literature means, how it was written, what it means, what makes it "good," and how we might approach studying it by asking these questions. Deconstruction brings methods of questioning canonical texts (such as Plato), thus suggesting that literary criticism should at least partially be concerned with reevaluating or even challenging traditionally celebrated texts and ideas of "truth." Combine all of this with a technological shift and hypertext, and we have a rich, new set of critical tools but a complicated project of how frame them all in some coherent discipline. Some have suggested replacing "literary" with "textual" to accommodate this complication. But this ignores the primary study, which is what makes literature stand apart from other writing.
The "crisis" should be thought of as an opportunity. The expanding canon is a good thing. Specialized theories are complicated by existing theories. The shrinking of English departments as a result of the technological shifting of collegiate pedagogy is not such a good thing. The idea (from deconstruction) that all meaning is "always already deferred" suggests that there is no way to ever get to a definitive, final meaning. This is obviously a problem with a field once concerned with uncovering "truth." With this indeterminacy, we have a skeptical eye toward all things absolute or universal. This applies to identity, any particular text, and any given meaning. Finally, English departments are shrinking even as the scope of literature and "textual studies" seems to be increasingly complicated and indeterminate. Overcoming the crisis will require a readiness to adapt, a willingness to consider any number of interpretations, and a number of ways of accessing "truth"—whatever that currently means in literary studies.