A "literal interpretation" of biblical texts is widely recognized as one of the essential marks of dispensational theology. But what does it mean to "take a text literally"? In the conversations between dispensationalists and various other groups, two definitions tend to emerge. When both definitions are in play simultaneously, confusion is inevitable. Let's take a quick look at the two:
1. "Literal" = the opposite of "figurative." I think everyone agrees that genres like poetry and apocalyptic literature often use imagery. Many people understand that imagery to be figurative, or "non-literal."
2. "Literal" = what the author intended to communicate. In other words, to take a text "literally" is to interpret it in the way that the author intended for it to be understood. As an example, no one (ok well let's hope no one . . .) thinks that when Jesus said "I am the door," he meant he was a piece of wood that swings on hinges to control access to an entry to an enclosure. But there is a point of analogical correspondence between a physical door and who Jesus is/what he does.
Both of these uses of the term "literal" are valid. It's a natural property of human language for words to carry different usages in different contexts. That's called a "semantic range [of meaning]." The problem is that some people use one meaning of "literal" as a stick to beat people who use the other meaning. Worse yet, some people who wield that stick also use the meaning that they beat others for using.
Let me put it a different way. Everybody agrees that the Bible contains figurative language—imagery. Some people think that "figurative" language should be interpreted "literally"—in the way the author intended that language to be understood. They're using the second definition appropriately. Other people argue that "figurative" language is inherently "non-literal." They're using the first definition appropriately.
But both groups recognize that the Bible contains imagery—words and combinations of words that describe things that are only metaphorically related to the normal usage of those words. Those words and combinations of words paint pictures or show points of comparison that make the author's point in the way that he (under inspiration) concluded was most effective.
A particular group of people (many dispensationalists) maintain that they are the only true "literal interpreters." They decide what portions of the Bible are figurative, and then stipulate that the definition of a "literalist" is someone who agrees with their conclusions. Someone who sees more biblical imagery than they do "isn't taking the Bible literally." They often interchange definitions of "literal" on the fly in an argument to support their conclusions.
The argument over who takes the Bible literally and who doesn't is NOT a question of whether the Bible contains figurative language. Everyone agrees that it does. The argument is also NOT over whether we should interpret the text in the way that the *author intended. Most everyone, at least among biblical inerrantists, would agree on this point as well. Rather, the argument is essentially a debate over which parts of the Bible consist of imagery and which parts do not. This is a valid and reasonable argument, but too often it has been distorted into deceitful propaganda designed to portray certain positions as compromising with theological liberalism.
*There is a relevant and worthwhile discussion over whether the meaning intended by the human author is always precisely equivalent to the meaning intended by the Divine Author, but for purposes of this discussion I'm assuming that the Divine Author is the primary and ultimate author.