Financial literacy is the ability to see and understand numbers. Many people get into debt because they lack the ability to really understand the total financial picture presented by numbers.
For example, a financial literate person will look at buying a car with a loan in terms of the total financial cost. They will consider how much the car is likely to be worth by the end of the loan. The amount paid in interest, the length of the warranty, etc. A financially illiterate person will tend to only look at the monthly payments and whether or not they can afford it right now.
Financial literacy is not something that is taught in most schools. People who are financially literate usually use it from their parents or on their own.