The first post here deals with Levels of Literacy...
Though admittedly I need to make it a bit better and more descriptive than it is now xD
I think a "Literate" writer is a person that is capable of wielding words rather expertly while also maintaining creative and original characters. They help to move a story along rather than just following along for the ride. They are artists. If you give me a specific sample of writing to look at, I can help you analyze it and "grade" it per se.
I'll tell you this though. You can definitely help yourself by making others think you're literate (whether you are or not, you need others to know it also). You know how people judge other people in the real world by a simple look? If a girl is wearing baggy black pants with chains, dark eyeliner, and dyed black hair, one might think she's an emokid. If you see a guy wearing a Hollister shirt, you might think he's a prep.
The same judgmental attitude applies to role playing. It's not necessarily right or a good thing, but it happens. And by abiding by those personality quirks, you can make yourself seem literate...and then become more literate if you are not already.
Normally, literate writers have small font (size ten) with or without color. Their posts have at least three paragraphs with dialogue. They describe scenery and actions and their character (in personality and physical features). They use the small font because it looks neater and the long posts won't seem to daunting.
Is anyone who uses this a literate? Certainly not. But in my years of scanning boards and trying to judge the state of the role play world, that's what I've come to look for.
I say you are what you tell yourself you are.