When you say something happens literally, you mean it actually, truly, really happened exactly as you describe it, not as an exaggeration or figure of speech. If you say “I literally ran all the way to school,” you mean you actually ran the entire distance, not that you walked quickly or felt rushed.

The word helps distinguish between what's real and what's metaphorical. When someone says “I'm so hungry I could eat a horse,” they don't literally mean they want to eat a horse. They're exaggerating. But if you say “I literally forgot my lunch today,” you're emphasizing that you really, actually forgot it.

Here's where things get tricky: people sometimes use literally as an intensifier to make their exaggerations sound more dramatic, saying things like “That test was literally impossible” when they mean it was very difficult. This drives some people crazy because it seems to contradict the word's meaning. But careful writers and speakers usually avoid this informal usage.