"Criticism" is the branch of literary study that defines, analyzes, interprets, and judges a work of literature according to various aesthetic systems.
The two main traditional Greek systems of criticism are Aristotelian and Platonic. Aristotelian criticism determines the value of a work according to its logical and formal qualities. That is, it is criticism of the work itself with no relation to other aspects of life. Platonic criticism determines the value of the work in relation to life. In theory, Aristotle's way is more objective and Plato's was more subjective. Both have influenced subsequent developments in theory and criticism in different ways.
That is generally where/when Western Literary Criticism and Theory is said to have begun. But a more modern concept of "traditional literary criticism" is the judging and defining of a literary canon. The canon is a group of literary works, selected by scholars, as the best representation of that country's (or community's) most valued literary works. A traditional American literary canon, for example, contains the likes of Hawthorne, Whitman, Emerson, Dickinson, Twain, Fitzgerald, and so on. With the rise of cultural theory (including feminism, race theory, deconstruction, and new historicism), the traditional canon has changed to include more works by female and minority writers, thus giving the canon a more accurate representation of American writers and culture.
Lastly, traditional literary criticism was more of a linear history of that canon. The canon and criticism became more "modern" with the inclusion of new writers as well as with the advent of those literary theories (such as deconstruction, new historicism, and post-structuralism) which assessed literary works using outside resources (such as psychoanalysis, language theories, and cultural theories).